Morning Report
May 29, 2025
“The US court ruling on tariffs has been welcomed by markets and the dollar surged overnight. The move is beginning to unwind, however, as it is broadly being seen as an obstacle rather than an end to Trump’s tariff regime. The focus today is on US growth.”
Tim Hallinan – Trading Director
USD
Markets breathed a collective sigh of relief and the dollar rose sharply last night, after the US Court of International Trade ruled that Trump overstepped his authority in the use of emergency economic powers legislation (IEEPA) to enact his sweeping tariffs. The administration has naturally already filed an appeal, but they have 10 days to reverse the orders if things stand. Investors do not like tariffs because they are broadly seen as inflationary supply shocks that distort resource allocation and weaken growth. They are less worried about the US economy than they were yesterday, and that has lifted the dollar. However, while a huge roadblock for Trump’s negotiation strategy, it is not the end of the story. There was no ruling on the industry-specific tariffs (cars, steel, and aluminium) which use different legislation, and there are other mechanisms that the executive branch can try to use. One that many are talking about is Section 122, which would allow him to enact 15% broad tariffs for 150 days, without the approval of Congress. It also makes the One Big Beautiful Bill Act even more concerning in terms of expanding the deficit, because they might be losing a big source of revenue. These realisations have the dollar retracing its steps this morning.
The main data today include a second estimate for Q1 GDP, which was first reported at -0.3%, and the weekly jobless claims data. Trump’s Truth Social feed will also be worth a watch – he has been relatively quiet so far, only posting an image saying that ‘nothing can stop what is coming’.
GBP
After an initial dip versus the dollar, sterling is trading relatively flat since the US court ruling and has inched closer to 1.20 against the euro. Even though the UK would have been more shielded to US tariffs than the EU anyway, sterling’s higher sensitivity to risk sentiment means that it tends to do slightly better than the euro when the market is expressing some relief. No data today, but we do get a speech from BoE Governor Bailey this evening.
EUR
EUR/USD has moved back below 1.13 this week as markets have become more optimistic about the US economy and tariffs. There has been little on the euro side to move the pair – the market remains gripped by the political story in the US. It is quite light on data again today, but investors will be looking to the final ECB speeches from the likes of Muller and Panetta ahead of next week’s rate decision. The market is pricing in a 98% chance of a further cut as things stand.
Markets
US stock futures are up 1.5-2% on the tariff court ruling, and the European indexes are set for a bumper open too. Nvidia shares jumped last night after a 70% surge in quarterly revenues and beating estimates, despite warnings of billions in losses as a result of the export curbs to China.
Main Economic Events (All Times CET)
2:30pm: US Q1 GDP 2nd Estimate & Unemployment Claims
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