Dollar Index Rebounds Amidst Legal Whiplash For Trade Tariffs

(RTTNews) - The Dollar Index rebounded during the week ended May 30 amidst conflicting court rulings that debated the powers available to President Trump to enforce the reciprocal tariffs on trade partners. Close on the heels of a trade court in the U.S. setting aside the reciprocal tariffs imposed by the Trump administration, an appeals court temporarily reinstated it, causing wild swings in the Dollar's fortunes that eventually resulted in a stronger greenback.

The U.S. dollar inter alia gained against the euro, British pound, the Australian dollar, the Japanese yen, the Canadian dollar, the Swedish krona and the Swiss franc. The Dollar Index recorded gains for the fourth week in a row.

The Dollar Index (DXY), a measure of the Dollar's strength against a basket of 6 currencies added 0.22 percent during the week ended May 30. The DXY which had closed at 99.11 on May 23 finished trading at 99.33 a week later. During the week, the index traded between the low of 98.69 recorded on Monday and the high of 100.54 recorded on Thursday.

The Federal Reserve, in its meeting held earlier in the month reiterated its warnings about the likelihood of inflation and unemployment rising alongside, resulting in difficult trade-offs. According to the minutes of the meeting released on Wednesday, participants cited the increase in uncertainty about the economic outlook and a rise in the risks of both higher unemployment and higher inflation to maintain the federal funds rate at current rates. Participants agreed that uncertainty about the economic outlook had increased further, justifying a cautious approach till the net economic effects of the array of changes to government policies became clearer.

Data released on Thursday showed the U.S. economy contracted at an annualized rate of 0.2 percent in the first quarter of 2025, versus the initial estimate of a 0.3 percent decline. The PCE-based inflation readings from the U.S. released on Friday more or less matched expectations, limiting the impact for the greenback.

Amidst the dollar's rebound that followed the court rulings in the U.S. and the mixed inflation readings from the region, the Euro slipped 0.15 percent against the Dollar. During the week ended May 30, the EUR/USD pair dropped to 1.1348, from 1.1365 a week earlier. The pair ranged between $1.1419 recorded on Monday and $1.1210 touched on Thursday. Data released during the week showed an unexpected decline in inflation in France. Inflation in Germany which was expected to decline however remained steady.

The week ended May 30 witnessed the pound falling 0.57 percent against the dollar amidst renewed rate cut expectations from the Bank of England to counter the trade tariff uncertainty. The sterling, which had closed at $1.3538 on May 23 declined to $1.3461 by May 30. The GBP/USD pair traded between a high of 1.3595 touched on Monday and a low of 1.3413 recorded on Thursday.

The Aussie also plummeted against the U.S. Dollar during the week ended May 30. The AUD/USD pair traded between a high of 0.6539 touched on Monday and a low of 0.6406 recorded on Thursday. The slippage for the pair during the week was 0.97 percent, from 0.6495 on May 23 to 0.6432 on May 30.

The Japanese yen also weakened during the week ended May 30 amidst data showing a better-than expected consumer confidence readings and a steady unemployment rate. The USD/JPY pair which had closed at 142.57 on May 23, increased to 144.06 in a week's time. The pair ranged between 142.11 and 146.29 during the week. Data released during the week also showed Japan's consumer confidence index rebounding from April's more than two-year low.

The Dollar Index is currently at 99.15 even as investors weigh the potential impact of the trade tariff policy on economic growth and price pressures. The monthly jobs data from the U.S. is due on Friday. The Dollar Index had closed at 99.33 on Friday and 98.71 on Monday.

Ahead of the ECB's interest rate decision due on Thursday, the EUR/USD pair has rallied to 1.1382 whereas the GBP/USD pair has increased to 1.3500. Ahead of the first-quarter GDP update, the AUD/USD pair has strengthened to 0.6451. Amidst comments from Bank of Japan Governor Ueda that rate hikes would come only when the economy was ready, the USD/JPY pair has declined to 143.42.