Dollar edges higher on U.S. court ruling; risk sentiment boosted

Investing.com - The U.S. dollar rose Thursday, bouncing after a court blocked President Donald Trump’s import tariffs on other countries, as traders expected fewer trade-related headwinds for the U.S. economy.

At 06:50 ET (10:50 GMT), the Dollar Index, which tracks the greenback against a basket of six other currencies, gained 0.1% to 99.850, after earlier climbing above 100 for the first time in a week.

Dollar helped by court ruling

The dollar extended its recent recovery into a third consecutive session after the U.S. Court of International Trade ruled that Trump overstepped his authority with his trade tariff plans. 

The Manhattan-based court ruled that the International Emergency Economic Powers Act, which Trump had used for his tariff agenda, did not give the president sufficient authority to impose tariffs, and that the final decision remained with Congress. 

The White House immediately appealed the decision. 

While the dollar has benefited from the ruling, the legal procedures following Wednesday’s move were likely to increase market uncertainty. 

Strategists at Goldman Sachs said the ruling blocks 6.7 percentage points of effective tariff hikes, but emphasized that “this ruling represents a setback for the administration’s tariff plans and increases uncertainty but might not change the final outcome for most major U.S. trading partners.”

These include Section 122 of the Trade Act of 1974, which allows tariffs of up to 15% for 150 days, and Section 301, which does not cap tariff levels or durations.

“We would expect the White House to announce a similar across-the-board tariff using Sec. 122 [of the Trade Act of 1974,” Goldman said.

The data slate includes the second reading on U.S. GDP and weekly jobless claims, while Fed speakers include Bank of Richmond President Thomas Barkin, Fed Bank of Chicago head Austan Goolsbee and Bank of Dallas head Lorie Logan.

“The best case for DXY is probably a 1.6% rally to 102.00 – but this won’t be in a straight line and conditions will remain choppy,” said analysts at ING, in a note.

Euros slips lower

In Europe, EUR/USD traded 0.1% lower to 1.1283, with the single currency retreating after the ruling re-appraises U.S. growth prospects and the risk premium attached to the dollar. 

“We think global asset managers did have a shock in April and are seriously looking at their dollar hedge ratios,” said ING. “But the newsflow is mildly supportive for the dollar and there is a scenario where EUR/USD can make it back to the 1.1050 area – consistent with our baseline views for this year that EUR/USD traces out a 1.10-1.15 range.”

GBP/USD traded largely unchanged at 1.3472, on course for monthly gains over just over 1% as elevated inflation keeps the Bank of England relatively restrained in terms of rate cuts.

Yen slips on heightened risk sentiment 

In Asia, USD/JPY traded 0.1% higher to 144.96, after briefly hitting a two-week high, with the safe-haven yen hit as risk sentiment received a boost from  the U.S. court ruling.

USD/CNY traded 0.1% lower to 7.1879, after it slid to a six-month low last week.