Dollar Rises Against Euro as US Court Blocks Trump’s Tariffs

US Dollar Surges After Court Rules Against Trump’s Tariffs

The US dollar strengthened sharply on Thursday after the Court of International Trade blocked former President Donald Trump from imposing import tariffs, marking a significant shift in forex markets. The court ruled that the US Constitution grants Congress, not the president, the authority to regulate international trade, even under emergency economic powers.

The Trump administration immediately appealed the decision, but the ruling provided temporary relief for the struggling dollar, which has faced pressure in 2024 due to trade uncertainty and inflation concerns.

Why Is the Dollar Rising?

Legal Uncertainty Eases: Markets reacted positively to the possibility of tariffs being rolled back, reducing stagflation risks.
Dollar Index Rebounds: The DXY (Dollar Index) climbed back above 100, its highest level in a week.
Currency Gains: The euro fell 0.42% to $1.1245, while the dollar rose 0.72% against the yen (¥145.86) and 0.63% against the Swiss franc (0.8326).

Market Reactions & Analyst Views

Nomura’s Yunosuke Ikeda: “If tariffs are unwound, dollar appreciation is natural. Trump’s policies created stagflation risks, so reversing them supports the USD.”
SMBC’s Hirofumi Suzuki: “The initial dollar rally may not last due to lengthy legal appeals.”
Fukuoka Financial’s Tohru Sasaki: “A sustained dollar rise above ¥148 could trigger further yen weakness.”

Broader Economic Impact

Stocks & Bonds Rally: US stock futures and Asian markets rose as risk appetite improved.
Fed Rate Cut Expectations Adjusted: Traders now price in 42 basis points of cuts (vs. 50 earlier in the week).
Global Debt Concerns Persist: Weak demand for long-dated bonds highlights worries over rising US deficits.

What’s Next for the Dollar?

While the short-term dollar rally reflects optimism, analysts remain cautious. A prolonged court battle over tariffs and US fiscal policy risks could limit gains. Investors will watch for:

Further legal developments on Trump’s tariffs
US budget negotiations impacting debt levels
Fed policy signals amid shifting rate cut expectations

Conclusion

The dollar’s rebound shows how sensitive markets are to trade policy shifts. However, with appeals pending and economic uncertainties lingering, the sustainability of this rally remains in question. Traders should monitor Fed decisions, bond markets, and US trade relations for future forex trends.