# United States
Today, the primary focus is the US Court of International Trade’s decision against the Trump administration’s “Liberation Day” tariffs. This ruling states that the 1977 law, which was used to justify these tariffs, is inapplicable. These tariffs were initially intended to address US border security and fentanyl trafficking issues. Initially, the ruling caused the US dollar to rally; however, it has now stabilized, showing mixed results. Notably, the dollar bloc and Scandinavian currencies have strengthened, while emerging market currencies have not fully bounced back.
Equity markets are generally positive about the ruling, with the exception of Taiwan and India. The Stoxx 600 has regained more than half of its losses from the previous day and is tracking higher for the third consecutive day. US index futures are up across the board, with the S&P 500 futures gaining around 1.5% and Nasdaq futures up approximately 2%. However, the bond market is experiencing some pressure, reflected in higher yields.
The dollar index initially surged following the court ruling, opening just below 100.50, but has since eased. The Atlanta Fed’s GDP tracker forecasts a 2.2% growth rate for Q2, which contrasts with the more conservative 1.3% prediction by Wall Street economists surveyed by Bloomberg.
Signs indicate that China’s container shipments were on an uptrend before recent Swiss agreements, though they’ve since declined. US tax revenues and fuel demand are lagging, hinting at a slowing labor market. This is demonstrated by a marginal decrease in the four-week moving average of jobless claims. On the horizon, May nonfarm payroll figures will be unveiled next week, with an early projection of 130,000—lower than April’s 177,000.
# Eurozone
The euro has experienced some volatility recently. After peaking at $1.1420 earlier this week, it dipped to a nine-day low of $1.1210 today. Despite this, the euro has rebounded to around $1.1280. Crossing the $1.1300 mark would enhance its technical outlook. External news flows, apart from the US trade ruling, remain scant, although US-EU trade talks are now intensifying. The EU’s Trade Minister Sefcovic will frequently engage with the US negotiation team led by Commerce Secretary Lutnick and Trade Representative Greer.
# United Kingdom
Sterling pulled back yesterday, reaching $1.3450 after hitting a three-year high of nearly $1.3600 earlier this week. Today, it further declined to about $1.3415 but has since rebounded to session highs near $1.3470. A strong close above this level would improve its technical standing.
# China
Yesterday, the dollar appreciated against the offshore yuan for the third consecutive day, gaining in seven out of the last nine sessions. Early gains in the dollar saw it surpass a three-week downtrend line at roughly CNH7.2030, reaching almost CNH7.2090 before dipping to around CNH7.1880. The PBOC set the dollar’s reference rate at CNY7.1907 for the first time this week, surpassing CNY7.19. Officials have continuously raised the dollar’s fix since Monday, when it was set at its lowest point since April, at CNY7.1833.
# Japan
The US dollar displayed a potential key reversal, trading on both sides of Monday’s range and settling above Monday’s high. Subsequently, it rose above JPY145.00, reaching almost JPY146.30 before retreating to find support above JPY145.00 in Europe. According to Japan’s Ministry of Finance report, local investors have increased their purchases of foreign bonds this year, while foreign investors have shown a stronger appetite for Japanese bonds. However, foreign stock purchases have been modest compared to last year. A slew of Japanese economic data releases is expected soon, covering jobs, industrial output, retail sales, and Tokyo’s CPI.
# Canada
On Monday, the US dollar formed a bullish hammer candlestick pattern against the Canadian dollar, having hit a seven-month low of around CAD1.3685. It rose to CAD1.3945, matching the (50%) retracement of the last downward leg from the May 15 high, marking the last instance above CAD1.40. The dollar initially climbed to nearly CAD1.3865 but has since returned to the CAD1.3820 area. The CAD1.3875-85 range holds key technical levels, including the 20-day moving average and the (61.8%) retracement target.
Canada is releasing its Q1 current account deficit today, although market impact is typically muted. Historically, Canada’s current account deficits ranged from 2.0% to 3.5% of GDP before the pandemic. In recent years, it has improved, with a current deficit under 1% of GDP. The Q1 deficit is anticipated to be around C$3.24 billion, up from C$2.23 billion in the same period of the previous year.
# Australia
The Australian dollar reached its yearly high on Monday, slightly above $0.6535, but has struggled to maintain upward momentum. It declined over the next few days to as low as $0.6410, matching its longest losing streak since spring. Today, it recovered to $0.6440, suggesting a potential end to the downturn. Australia’s Q1 GDP will be reported on June 4, and today’s private capital expenditure report showed a slight decline, underscoring economic challenges. Upcoming data will cover April’s retail sales and private sector credit figures.
# Mexico
The MSCI Emerging Market Currency Index snapped a four-day gain streak, incurring its second loss in ten sessions. Latin American currencies faced setbacks, led by significant reductions in the Brazilian real and Mexican peso. The dollar hit a new low for the year against the Mexican peso on Tuesday, peaking at MXN19.4250 yesterday before dropping to around MXN19.37. Meanwhile, the Bank of Mexico’s inflation report revised economic forecasts, predicting a modest 0.1% growth this year, down from earlier higher estimates. The central bank minutes, which recently enacted a half-point rate cut, will be released today, possibly pointing to more rate reductions.
