Economic gloom exacerbated by tariff uncertainties. The US dollar faces a double blow and resumes its downward trend.

The US economic data released on Thursday showed weakness, compounded by the Federal Circuit Court of Appeals temporarily staying a ruling that had previously blocked the Trump administration's global tariffs, intensifying investors' concerns about economic growth prospects and putting pressure on the US dollar. The Bloomberg Dollar Index and Treasury yields fell sharply in tandem as data showed a larger-than-expected increase in initial jobless claims last week and a contraction in US first-quarter Gross Domestic Product (GDP). Prior to the release of this data, the US International Trade Court had halted the government's implementation of several broad tariff measures last month, but the decision was subsequently stayed by the Federal Circuit Court of Appeals. Shaun Osborne, Chief FX Strategist at Scotiabank, commented after the appeals ruling: "Tariff chaos continues. It begs the question whether investors are fed up with the capricious nature of trade policy." Although the US dollar strengthened briefly in the Asian trading session due to the International Trade Court's tariff ban, it quickly gave up gains in the London trading session. The US dollar declined against all Group of Ten currencies, with the most significant declines against the euro and the Swedish krona. The ongoing global trade disputes that have been roiling the markets this year have added another variable. Analysts point out that aside from the appeals process, the Trump administration still has various alternative options to ensure the continuation of its signature economic policies. Helen Given, a Forex trader at Monex Inc., stated: "The government is likely to find ways to challenge and possibly overturn this court ruling. Even so, this matter will still weaken confidence in the overall US economic outlook." Jim O'Neill, former Chairman of Goldman Sachs Asset Management, said in an interview, "I don't see any other possibility than for the dollar to soften further this year, as it is significantly overvalued." While the possibility of reducing tariffs may temporarily stabilize the US dollar exchange rate, he expects funds to further flow into other stock markets, dragging down the dollar. The initial ruling of the US International Trade Court suspended most of Trump's tariff measures: the global unified tariff, increased tariffs on China and other countries, as well as the fentanyl-related tariffs imposed on Canada, Mexico, and China were all within the scope of this ruling. However, tariffs authorized for implementation (such as those on steel, aluminum, and automobiles) were not affected. Goldman analysts stated that this ruling is only a temporary setback to Trump's trade agenda and can be offset by other tax measures. Trump may also resort to using other authorizations to impose tariffs on specific industries or countries, as he did in his first term. Economists at Citigroup Andrew Hollenhorst, Veronica Clark, and Gisela Young pointed out that the ruling "significantly complicates ongoing trade negotiations, as countries now cannot determine which potential tariffs may take effect." However, "this is unlikely to prevent the government from successfully imposing a large number of new tariffs." Options market sentiment Options traders still hold a bearish outlook on the US dollar for the next year, but with slightly reduced confidence. The so-called one-month risk reversal options (used to track the demand difference between bullish and bearish bets on the dollar) continue to show a preference for downside protection. Data from the Depository Trust & Clearing Corporation (DTCC) corroborates this view. Despite a significant rebound in the US dollar spot market this week, the nominal value of bearish options positions remains about $13 billion higher than bullish options. Based on the latest fund flow patterns and position indicators, options traders have the strongest bullish sentiment on the euro, Swiss franc, Norwegian krone, and New Zealand dollar against the US dollar.