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Dollar on Edge: Supreme Court Tariff Ruling and Deficit Warnings Collide
Abstract：The US Dollar faces a double-header of fiscal event risks: an imminent Supreme Court ruling on tariffs and Moody's warning over Trump's $1.5 trillion defense spending plan.
The US Dollar index is trading near crucial resistance levels as traders navigate a minefield of fiscal and legal risks emanating from Washington. Beyond the immediate payroll data, two structural developments involving the Trump administration are driving medium-term currency sentiment.
The Supreme Court's “Tariff Verdict”
Markets are bracing for a potential ruling from the US Supreme Court as early as Friday regarding the legality of President Trump's use of the International Emergency Economic Powers Act (IEEPA) to impose tariffs.
Moody's Sounds the Alarm on Deficits
Simultaneously, fiscal hawks are reacting to President Trump's proposal to hike the US military budget to $1.5 trillion by 2027—a near 50% increase from current levels.
The FX Implication
While fiscal expansion can temporarily boost GDP and the currency (via higher yields), the long-term corroding effect of “twin deficits” (fiscal and current account) remains a structural headwind for the Greenback. If the bond market rebels against this new supply, we could see a steepening of the yield curve, complicating the Fed's fight against inflation.
Disclaimer:
The views in this article only represent the author's personal views, and do not constitute investment advice on this platform. This platform does not guarantee the accuracy, completeness and timeliness of the information in the article, and will not be liable for any loss caused by the use of or reliance on the information in the article.
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