North American Summary and Highlights 29 May

North American session

The USD slipped in North America with UST yields while equities saw a limited response to the court ruling against tariffs, which Trump looks set to fight. The move was already under way before given extra momentum by a rise in initial claims to 240k from 226k. Q1 GDP was revised up to -0.2% from -0.3% but consumer spending as revised down to 1.2% from 1.8%. Core PCE prices were revised down to 3.4% from 3.5%.  Later April pending home sales plunged by 6.3%. 

USD/JPY fell to 144 from 145 and EUR/USD rose to 1.1375 from 1.1275. GBP/USD reached 1.35 but lagged EUR/USD, as EUR/GBP rise to .8425 from .8375. AUD and CAD saw only marginal gains versus the USD. There was little market reaction to a Fed statement that Powell had met with Trump and resisted pressure to cut rates, or later the Trump tariffs being reinstated while the appeal proceeded.  

European morning session 

The USD reversed most of its overnight gains through the European morning. EUR/USD recovered from 1.1250 to 1.1280, while USD/JPY fell back to 145.15 from an open near 146. There were similar losses against most currencies, with the safe havens slightly outperforming.  

The USD’s decline reflected some more circumspect views on the significance of the court ruling that the reciprocal tariffs are illegal. The White House is appealing, so higher courts may change the decision, but in any case, there are still product specific tariffs and there are also other legal avenues by which tariffs can be imposed on countries with large trade surpluses. Equities generally slipped lower after overnight gains.