Forexlive Americas FX news wrap 29 May: Tariffs off and on again on court rulings

A full slate of U.S. data and policy news hit markets on Thursday, with mixed signals from the economy and key developments on the trade front. While economic figures showed weakness, a court ruling on Trump-era tariffs was also an influence.

Trade policy developments

At the start of the day, a panel of federal judges from the U.S. Court of International Trade ruled that former President Trump overstepped his authority by using the International Emergency Economic Powers Act (IEEPA) to impose wide-reaching tariffs on China and other countries. The court found that the law—designed for embargoes and sanctions, not tariffs—does not grant the president “unbounded authority” to tax imports globally. The ruling declared many of the tariffs illegal and gave the administration 10 days to begin winding them down. However, the Trump administration quickly filed an appeal with the U.S. Court of Appeals for the Federal Circuit.

Later this afternoon, a federal appeals court temporarily reinstated many of former President Trump’s tariffs on China and other trading partners, pausing a lower court’s earlier ruling that had deemed the duties illegal. The U.S. Court of Appeals for the Federal Circuit issued the stay on an administrative basis, allowing time to consider the Trump administration’s request for a longer delay. The move helps preserve Trump’s key trade weapon while the legal battle over the tariffs continues.

White House officials sought to downplay the impact. National Economic Council Director Kevin Hassett called the earlier ruling a “hiccup,” expressing confidence in the administration’s trade strategy. WH Economic Advisor said that you can assume even if they lose tariff cases, they will do it another way.

Chicago Fed President Austan Goolsbee weighed in and warned that tariff-related uncertainty could weigh on the economic outlook. He noted that:

• If tariffs are avoided—whether through a deal or other means—it could create conditions where interest rates might come down.

• However, if politics starts to dictate interest rate policy, inflation could reemerge.

• Central banks must sometimes make decisions unpopular with political leaders to maintain stability.

• The recent court ruling on tariffs, while significant, may prolong uncertainty if the administration seeks other ways to justify tariffs.

• That prolonged uncertainty, Goolsbee said, would be a negative for the economy.

Key economic data today showed

• GDP (Q1 2025): The U.S. economy contracted at an annual rate of -0.2%, slightly better than the initial -0.3% estimate. Weakness was driven by higher imports and reduced government spending, despite modest gains in business investment and exports.

• Corporate profits: Profits fell by $118.1 billion, the sharpest quarterly drop since 2020, reflecting margin pressures and slowing demand across several sectors.

• Initial jobless claims: Rose to 240,000, up 14,000 from the prior week and above estimates. Is it temporary due to faulty seaonals or is it the start of a weaker trend?

  • Continuing claims: Increased to 1.919 million, the highest since November 2021, hinting at a gradually cooling labor market.

• Pending home sales (April): Fell 6.3% month-over-month, the steepest drop since mid-2022. All regions declined, with the West leading losses. High mortgage rates and uncertainty weighed on housing demand.

The USD today fell across the major currencies, helped by lower rates which are ending near session lows.

For the greenback it fell by

• -0.68% versus EUR
• -0.46% versus the JPY
• -0.16% versus the GBP
• -0.56% versus the CHF
• -0.17% versus the CAD
• -0.25% versus the AUD
• -0.07% versus the NZD

Looking at the US debt market as the day draws to a close:

• 2 year yield 3.938%, -5.3 basis points.
• 5- year yield 3.998%, -6.4 basis points
• 10 year yield 4.422%, -5.7 basis points
• 30-year yield 4.91%, -5.7 basis points

Major US indices closed higher

• Dow Jones Industrial Average rose 117 points to 42,215.73 (+0.28%)

• S&P 500 gained 23.62 points to 5,912.17 (+0.40%)

• Nasdaq Composite climbed 74.93 points to 19,175.87 (+0.39%)

After the close both Costco and Dell reported earnings. Dell shares are trading up 2.68% in after-hours trading. Costco is trading marginally higher.