Ongoing uncertainty around US fiscal and trade policy continues to weigh on the US Dollar [Video]

What began as early trade optimism yesterday, triggered by the US Court of International Trade deeming Trump’s tariffs illegal, turned out to be too good to be true. Things quickly got messy when Trump appealed the decision, prompting the US Court of Appeals to pause the ruling in order to review arguments from both sides. Meanwhile, a separate federal court issued a similar but more limited decision on the tariffs. As a result, the initial ruling that had cancelled the tariffs is now effectively on hold.

So it’s under this heavy cloud of uncertainty that the early risk-on rally yesterday fizzled out. Ongoing uncertainty around US fiscal and trade policy continues to weigh on the US dollar. Meanwhile, the economic impact of aggressive Trump policies – both on trade and government offices – is starting to show in the data. Figures released yesterday confirmed a contraction in US GDP in Q1, with spending growth more than halving and the trade deficit ballooning as firms rushed to import goods ahead of possible tariffs. Inventories rose. A key price gauge showed a sharp reversal in inflation pressures. Today’s PCE data – the Fed’s preferred inflation gauge – could surprise to the downside or meet expectations, but the full effects of the ‘tariff tsunami’ likely haven’t reached shore yet. The data will need to be taken with a pinch of salt.

In energy, US crude wavers around the $60pb before OPEC confirms a third big output hike this weekend.

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