Good morning
The US Court of International Trade has blocked President Trump’s Liberation Day Tariffs implemented under the International Emergency Economic Powers Act (IEEPA). It ruled that the global tariffs exceeded Trump’s authority under the emergency law, while also ruled that the tariffs hitting the likes of Mexico and Canada on drug trafficking were illegal as they do not address the trafficking problem. The Trump administration has filed a notice of appeal with the US Trade Court, where it is very likely to go not just to the Court of Appeal but likely up to the US Supreme Court.
However, consensus remains that Trump’s tariffs are likely to remain in place during the appeal process. There were massive moves in markets on the back of this news, with the Dollar strengthening, risk sentiment improving, while safe haven assets such as gold and JPY underperforming.
The FOMC minutes released yesterday note heightened uncertainty which continues to warrant a cautious approach until the full economic effects of recent government policy changes become clearer. The Committee reiterated that future decisions would be guided by a broad set of data, the economic outlook, and the balance of risks. New York Fed President John Williams recently stated that clarity on the impact of tariffs likely won’t emerge until the June or July meetings, while Cleveland FED's Hammack and Atlanta’s Bostic (both non-voting members this year) suggested it could take until late summer or even three to six months to gather enough information.
The main focus today will be the release of US Q1 GDP data where consensus looks for a 3.7%y/y print while the latest weekly jobless claims are expected at 230K. Another busy day of speeches from Fed officials such as Goolsbee, Kugler and Daly in that order. Goolsbee and Kugler are voters, with the former maintaining a relatively dovish stance.
The USD index rose 0.4% in Asian trade to 100.237, extending a recent recovery.
EUR/USD consolidates losses near 1.1250 in early Europe trading.
GBP/USD holds the corrective pullback near $1.3450 after a failed attempt to recapture $1.3600 earlier this week.
The Japanese yen is trading sharply lower on the back of increased risk appetite, USD/JPY rose 0.7% to 145.81. Meanwhile, Japan’s Chief Trade Negotiator and Economy Minister Ryosei Akazawa said earlier today that he “wants to meet with US Treasury Secretary Scott Bessent this time” to conduct ministerial talks.
China’s yuan weakened slightly, with the USD/CNY rising 0.1% to around 7.1991 after it slid to a six-month low last week.
The Bank of Korea resumed its rate cut cycle, lowering the policy rate to 2.50% from 2.75% in a unanimous decision. The downward revision of GDP should give the market hope for further easing. The BoK’s focus is now on fostering growth rather than anchoring inflation. But Governor Rhee’s comments appeared less dovish about easing moves to come. Analysts expect a total of 50bp cuts in the 2nd half of the year. The South Korean won weakened with USD/KRW rising 0.6% to 1,380.37.
The Singapore dollar’s USD/SGD pair rose 0.4% to 1.2935, while AUD/USD pair was steady around $0.6422.
The Indian rupee’s USD/INR pair rose 0.1% to 85.527.
| Interest Rate Swaps | EUR | USD | GBP |
| 3Y | 2.03 | 3.64 | 3.83 |
| 5Y | 2.20 | 3.66 | 3.88 |
| 10Y | 2.51 | 3.89 | 4.16 |
