Articles

Headlines:

• Dollar gains abate as traders digest what’s next for Trump tariffs
• Cheatsheet on how Trump could sidestep the US court ruling and implement tariffs – MUFG
• India trade minister official says trade talks with US are progressing well
• China reaffirms having maintained communications with US since Geneva talks
• Japan prime minister Ishiba reportedly arranging a call with Trump for later tonight
• Japan trade negotiator Akazawa says want to meet with Bessent for ministerial talks
• Russia says there are currently no plans for Putin to speak to Trump

Markets:

• AUD leads, EUR lags on the day
• European equities higher; S&P 500 futures up 0.9%
• US 10-year yields up 2.6 bps to 4.505%
• Gold up 0.3% to $3,300.99
• WTI crude up 0.6% to $62.19
• Bitcoin up 1.3% to $108,754

It was a relatively quiet session with some bank holidays in the likes of Germany, France, and Switzerland. But European markets were still open and the big story comes from overnight as Trump’s reciprocal tariffs was blocked by the US Court of International Trade.

The sectoral tariffs on steel, aluminum, semiconductors, and autos are all still in place though. And Trump is to expedite an appeal in the courts to overturn the ruling, though it remains to be seen if he will be successful on that.

Even if he isn’t, there are still other avenues in which he can go forward with his tariffs plan. Most of that will take months to see through but the quickest one would be to invoke Section 122 from the Trade Act of 1974, allowing for 15% tariffs for 150 days. But we’ll see what his response will be later.

The dollar was higher in Asia trading but has more or less surrendered all of the early gains in European trading.

EUR/USD was down to 1.1210 earlier but is now back up to 1.1275, down just 0.15% on the day. Meanwhile, USD/JPY was up around 146.00 to start the session but is holding closer to the 145.00 mark now – up just 0.14%. Elsewhere, the dollar is also trading near flat against the pound, franc, and loonie with marginal changes against the antipodes.

The check back in the dollar also sees gold recover early losses to be up now, just above the $3,300 mark. The low earlier today touched $3,246 for the precious metal.

In other markets, equities are holding firmer but have also eased up on the early gains. S&P 500 futures are up 0.9% but were up as much as 1.6% earlier in the session. European indices are also higher but the gains are nothing to shout about with the DAX seen only 0.1% higher at the moment.

All eyes will be on what Trump’s response will be as markets are digesting what the future will hold on his tariffs plan. I’ll be off tomorrow for a personal day but I’ll catch you guys again next week. Have a good end to the week and wonderful weekend, everyone!

This article was written by Justin Low at www.forexlive.com.

India trade minister official says trade talks with US are progressing well and that he expects a good outcome soon. We’ve been waiting for a trade deal with India for several weeks as it’s been said to be the first one to come. Eventually, UK took the place.

This article was written by Giuseppe Dellamotta at www.forexlive.com.

Leading up to the session, USD/JPY traded back up towards 146.00 before gradually slipping back to around 145.20 levels on the day. The pair is still up some 0.3% today but the gains are nothing to really shout about compared to earlier. The same goes for EUR/USD, which traded down to 1.1210 at the lows but is now up to 1.1275 on the day.

The US Court of International Trade may have ruled to block Trump’s reciprocal tariffs but it doesn’t mean it’s the end of that. Trump will appeal the decision and surely fast track the motion in the courts to try and get the ruling overturned. And as you would expect in Trump fashion, he will be loud about it and reaffirm strong belief in winning the appeal.

Some background on this from earlier:

As a reminder, the US Constitution gives Congress the power to impose tariffs but much of this power has since been delegated to the Executive Branch (led by the president) since the Trade Expansion Act of 1962. This means that the Executive Branch can call the shots on tariffs without the need for Congressional approval. And so, courts have allowed for the Executive Branch to retain this authority – at least until today when the latest ruling above is out.

So, that is what Trump is trying to challenge it would seem. I’m no legal expert but some hot takes on the situation is that the court decision is likely to be upheld.

However, Trump does still have other avenues to pursue if he really still wants to go forward with tariffs as seen here.

That being said, all other avenues are going to take a much longer time. That can range from anything between six months to a year. And while awaiting that, the supposed reciprocal tariffs should rightfully not be collected.

In turn, that marks a loss of income for the government in a time when the bond market is already signaling some degree of uneasiness when it comes to the US deficit. So, what becomes of Trump’s plans for tax cuts now too? That’s another point to consider in all of this.

And as much as Trump is going up against the world with tariffs, the fight against China continues to be one that he is especially adamant on winning.

What is disguised by tariffs is certainly further steps in the decoupling between the US and China. And in time, we will get heavier sectoral tariffs against China and all of that will surely be more evident. But for now at least, his plan has hit a snag.

On the one hand though, all of this might ease concerns about inflation at least. And that will perhaps make the Fed’s job a little easier in the short-term. But if Trump continues to pursue tariffs down other roads, it’s still going to be an issue for the central bank either later this year or early next year. So, the can is just being kicked down the road in that regard.

But also from a political perspective, how will all of this play into Trump’s image heading into the midterm elections in November next year?

In a time when the world moves on from one issue to another so quickly, it’d be easier for Trump to create chaos now and likely be forgotten by next year. But if we are still facing the issue of tariffs with potential impact on the US economy for Q2 or Q3 next year, that’s not going to be a good look for Trump going into the midterms. And that will be something that he has to consider as well.

There’s so much at stake and in essence, there’s even more uncertainty for markets to deal with now. There is scope for some short-term reprieve but depending on Trump’s response, the initial reaction we’re seeing might not hold in the big picture.

In any case, there’s no doubt Trump’s plans have hit a bit of a roadblock for the time being. But a diversion doesn’t necessarily mean a change in course at the end of the day. So, keep that in mind.

This article was written by Justin Low at www.forexlive.com.

MUFG has made a great cheatsheet on the range of possible acts that Trump could use to implement tariffs and sidestep the US court ruling. The ruling is of course not the end of the tariffs saga. It just adds more uncertainty and volatility.

I think it would been better to let things play out as Trump doesn’t want to sink the economy anyway and “escalate to de-escalate” is just his strategy to bring countries to the table.

This article was written by Giuseppe Dellamotta at www.forexlive.com.

• We have proposed talks with Ukraine in Istanbul on 2 June
• But yet to have an answer from Kyiv
• Not constructive to claim that Russia is delaying the process
• The main thing right now is to continue direct talks with each other

This article was written by Justin Low at www.forexlive.com.

The USD got a boost across the board tonight after a US Federal Court ruled against Trump’s reciprocal tariffs from going into effect. The first reaction was of course expecting even better growth ahead with the tax cuts, deregulation and so on, but this is not a permanent thing.

The Trump administration has already appealed the ruling and the President has other ways to impose tariffs as Goldman Sachs mentioned here. So, overall, I would say it doesn’t change much and it just adds to more volatility ahead.

For further gains, the US
Dollar will need either strong economic data to make the market to price out the
rest of the rate cuts expected by year-end or weak data from its peers to make
the divergence with the Fed stronger.

Starting from next week, we have lots of key events for the USD
including the release of the ISM PMIs, the NFP and the CPI, which will
culminate into the FOMC decision on June 18th.

On the 1 hour chart, we can see that the price broke below the key support zone around the 1.1260 level where we had also an upward trendline for confluence. The price then recovered the losses and is now back retesting the support that now might turn into resistance. The sellers will likely step in around these levels with a defined risk above the downward trendline to target new lows. The buyers, on the other hand, will look for a break above the downward trendline to increase the bullish bets into new highs.

This article was written by Giuseppe Dellamotta at www.forexlive.com.

That will translate to the morning time in the US. As Trump’s reciprocal tariffs hit a snag, this call will be an interesting one as Japan is still one of those more heavily hit from sectoral tariffs. For some background, Akazawa will also be in Washington later to meet with Bessent to sort out tariff talks today and tomorrow.

This article was written by Justin Low at www.forexlive.com.

• China and US have used multilateral, bilateral occasions to maintain communications at various levels
• Focused on US export controls abuse in semiconductors sector
• Very concerned by EU tire anti-dumping probe
• Will defend legitimate rights, interests of Chinese firms

Well, they’d be pleased by the latest court decision on the reciprocal tariffs. But again, sectoral tariffs are still applicable and you can definitely bet that Trump will keep the pressure up via non-tariff measures too. The two sides are now enjoying a little break in tensions but it will continue to be a key macro development to watch during Trump’s term.

This article was written by Justin Low at www.forexlive.com.

• Eurostoxx +0.7%
• Germany DAX +0.4%
• France CAC 40 +1.0%
• UK FTSE flat
• Spain IBEX +0.1%
• Italy FTSE MIB +0.4%

The cautious optimism holds as we look to get things underway on the session. In FX, we have seen the dollar give back a chunk of its gains though. That as traders are still largely digesting how things will play out on Trump’s tariffs from hereon. USD/JPY is up 0.4% to 145.40 but off the 146.00 mark in the past hour. S&P 500 futures are up 1.4%, with tech shares in particular looking buoyed after Nvidia’s earnings beat once again.

This article was written by Justin Low at www.forexlive.com.

• Will continue demanding US to reconsider tariff measures
• Want to meet with Bessent this time
• Will conduct ministerial talks on trade expansion, economic security cooperation
• Aware of US court decision to block Trump tariffs
• Will examine the details and potential impact on Japan

While the block on reciprocal tariffs – if upheld – is a positive development, Japan is still one of those more heavily impacted by sectoral tariffs. That especially on autos, as highlighted previously here.

This article was written by Justin Low at www.forexlive.com.

• No talk of exchange rate target with Bessent
• G7 finance ministers saw positive signs in tariff talks

Just some token remarks really. As things stand, Akazawa is on his way to Washington for talks today and tomorrow. So, let’s see how that will pan out. Even though Trump’s reciprocal tariffs might have hit a snag, Japan is still among those more heavily hit by sectoral tariffs – autos in particular.

This article was written by Justin Low at www.forexlive.com.

The closure will be in observance of Ascension Day and applies to Germany, France, and Switzerland among other countries. So, there will be a bank holiday observed there. However, the Xetra and Frankfurt Stock Exchange will be open for trading as per usual. But the Euronext will be closed for the entire day. So, just a heads up on that.

This article was written by Justin Low at www.forexlive.com.