US Dollar Under Pressure Amid Trade Turmoil
The US dollar began the week facing downward pressure following a significant ruling from the US Supreme Court. The court invalidated a substantial portion of the tariff system that was previously implemented by former President Donald Trump, which was based on emergency powers. This ruling was initially seen as a positive development for global economic growth, as it restricts unilateral trade actions by the US.
However, in a swift response, Trump announced a new uniform global tariff rate of 15%, which is grounded in a different legal framework. This move signaled to the markets that while the legal mechanisms may change, the overarching policy direction regarding tariffs remains unchanged.
Market Reactions
In the wake of these developments, the dollar index (DXY) is attempting to stabilize after testing the 96-point mark, yet it remains within a broader consolidation phase. The combination of legal uncertainty and the persistence of restrictive trade policies has led to a widespread sell-off of the dollar. Investors are reassessing the US's bargaining position in trade negotiations, the fiscal implications of these tariffs, and the potential for prolonged legal disputes concerning tariff refunds.
With markets in Japan and China closed, the limited liquidity has further exacerbated currency movements. The EUR/USD pair has seen an increase of nearly 0.30%, reaching 1.1830, while the USD/JPY has decreased by 0.25%, settling at 154.5580. This market reaction reflects not only the immediate trade headlines but also a growing discomfort regarding the unpredictability of US policy.
Safe-Haven Assets and Market Segments
As a result of the turmoil, safe-haven assets have gained traction, while riskier market segments have faced pressure. Gold prices have surged to their highest levels in three weeks, indicating a flight to safety among investors. Conversely, oil prices have declined due to concerns over demand, despite ongoing discussions between the US and Iran. Additionally, the cryptocurrency market has experienced significant position liquidations.