5 Signs That Suggest Bitcoin Price Has 'Room for Further Expansion'

Source: Theguardian

Senior Trump administration officials on Thursday downplayed the impact of a U.S. trade court ruling that blocked the most sweeping of President Donald Trump's tariffs, expressing confidence it would be overturned on appeal and insisting there are other legal avenues to employ in the interim.

Financial markets, which have whipsawed wildly in response to every twist and turn in Trump's chaotic trade war, reacted with cautious optimism on Thursday, a day after the U.S. Court of International Trade ruled that Trump overstepped his authority in imposing punitive tariffs on virtually every country in the world.

The Trump administration immediately asked an appeals court to stay the ruling and allow the tariff regime to remain in place. Trump has put tariffs at the center of his effort to extract concessions from U.S. trading partners, including traditional allies such as the European Union.

White House economic adviser Kevin Hassett expressed confidence that the ruling would ultimately be reversed in an interview with Fox Business on Thursday. He also said it would not get in the way of signing new trade deals.

"If there are little hiccups here or there because of decisions that activist judges make, then it shouldn't just concern you at all, and it's certainly not going to affect the negotiations," Hassett said.

White House trade adviser Peter Navarro, a staunch proponent of higher tariffs, told Bloomberg TV that the Trump administration could rely on other laws to implement import taxes if the court's decision remains in place.

Trump had invoked the International Emergency Economic Powers Act (IEEPA), a law intended to address threats during national emergencies, to impose tariffs on almost every U.S. trading partner, raising fears of a global recession. The president temporarily suspended many of the tariffs until early July after markets swooned in response.

The court found that the emergency powers law does not grant Trump the unilateral power to order such sweeping tariffs. Some sector-specific tariffs, such as those Trump has imposed on steel, aluminum and automobiles, were imposed under separate authorities on national security grounds and were unaffected by the ruling.

Canadian Prime Minister Jay Carney welcomed the decision, saying it was "consistent with Canada's longstanding position" that Trump's tariffs were unlawful.

Other U.S. trading partners offered careful responses. The British government said the ruling was a domestic matter for the U.S. administration and noted it was "only the first stage of legal proceedings."

Both Germany and the European Commission said they could not comment on the decision.

MODEST MARKET GAINS

Several analysts said it was preliminary to conclude this closes the door entirely on Trump's sweeping tariffs, with legal paths other than IEEPA likely at his disposal.

"We suspect the administration will lean on other legal authorities to maintain tariff levels around current levels," Bernard Yaros, lead U.S. economist at Oxford Economics, wrote in a note to clients on Thursday.

After prompting an initial surge in stocks in Asia, the ruling stimulated more muted reactions in Europe, where indexes were largely flat, and in the U.S., where gains were modest. The S&P 500 was up about 0.5%, having given back about half of its initial rise at the opening bell.

An early rally in the dollar also fizzled and the greenback was about 0.4% lower against a basket of major trading partner currencies. Bond yields also slipped.

Following a market revolt after his major tariff announcement on April 2, Trump paused most import duties for 90 days and said he would hammer out bilateral deals with trade partners.

But apart from a pact with Britain this month, agreements remain elusive, and the court's suspension of the tariffs may dissuade countries like Japan from rushing into deals, analysts said.

"Assuming that an appeal does not succeed in the next few days, the main win is time to prepare, and also a cap on the breadth of tariffs – which can't exceed 15% for the time being," George Lagarias, chief economist at Forvis Mazars international advisers, said.

Trump's trade war has shaken makers of everything from luxury handbags and sneakers to household appliances and cars as the price of raw materials has risen, supply chains have been disrupted and company strategies redrafted.

Source: Reuters

One study, published by the National Bureau of Economic Research, found that foreign insurers, pension funds and mutual funds hedged 44%, 35% and 21% of their respective dollar portfolios in 2020, with much higher ratios for bonds compared to stocks. Apply that range to the $30 trillion of total American assets held by non-U.S. investors as of last year, and the implication is that anywhere between $24 trillion and $17 trillion could be unhedged.

Even in deeper markets like the Japanese yen, euro or Canadian dollar, hedging comes at a price. The typical method is to use forward contracts, which involves locking in an exchange rate by agreeing to buy one currency and sell another at a future date. The cost is largely determined by the difference in government bond yields between the two markets. Relatively high U.S. interest rates therefore make it expensive for local investors to hedge their dollar exposure.

Source: Reuters

The number of Americans filing new applications for jobless benefits increased more than expected last week and the unemployment rate appeared to have picked up in May, suggesting layoffs were rising as tariffs cloud the economic outlook.

The report from the Labor Department on Thursday showed a surge in applications in Michigan last week, the nation's motor vehicle assembly hub. The number of people collecting unemployment checks in mid-May was the largest in 3-1/2 years. The outlook for the economy is dimming with other data showing a sharp decline in corporate profits in the first quarter.

A U.S. trade court on Wednesday blocked most of Trump's tariffs from going into effect in a sweeping ruling that the president overstepped his authority. Economists said the ruling, while it offered some relief, had added another layer of uncertainty over the economy.

"This is a sign that cracks are starting to form in the economy and that the outlook is deteriorating," said Christopher Rupkey, chief economist at FWDBONDS. "There is nothing great about today's jobless claims data and the jump in layoffs may be a harbinger of worse things to come."

Initial claims for state unemployment benefits rose 14,000 to a seasonally adjusted 240,000 for the week ended May 24, the Labor Department said. Economists polled by Reuters had forecast 230,000 claims for the latest week.

Unadjusted claims increased 10,742 to 212,506 last week, lifted by a 3,329 jump in filings in Michigan. There were also notable increases in applications in Nebraska and California.

Despite the rise in claims, worker hoarding by employers following difficulties finding labor during and after the COVID-19 pandemic continues to underpin the jobs market.

Nonetheless, there has been an uptick in layoffs because of economic uncertainty asTrump's aggressive trade policy makes it challenging for businesses to plan ahead.

A report from the Bank of America Institute noted a sharp rise in higher-income households receiving unemployment benefits between February and April compared to the same period last year. Its analysis of Bank of America deposit accounts also showed notable rises among lower-income as well as middle-income households in April from the same period a year ago.

Economists expect claims in June to break above their 205,000-243,000 range for this year, mostly driven by difficulties adjusting the data for seasonal fluctuations, following a similar pattern in recent years.

Minutes of the Federal Reserve's May 6-7 policy meeting published on Wednesday showed while policymakers continued to view labor market conditions as broadly in balance, they "assessed that there was a risk that the labor market would weaken in coming months."

They noted that there was "considerable uncertainty" over the job market's outlook, adding "outcomes would depend importantly on the evolution of trade policy as well as other government policies."

The U.S. central bank has kept its benchmark overnight interest rate in the 4.25%-4.50% range since December as officials struggle to estimate the impact of Trump's tariffs, which have raised the prospect of higher inflation and slower economic growth this year.

U.S. stocks opened higher. The dollar eased against a basket of currencies after a brief rally. U.S. Treasury yields fell.

SWELLING UNEMPLOYMENT ROLLS

The number of people receiving benefits after an initial week of aid, a proxy for hiring, increased 26,000 to a seasonally adjusted 1.919 million during the week ending May 17, the claims report showed. The elevated so-called continuing claims reflect companies' hesitance to increase headcount because of the economic uncertainty.

Continuing claims covered the period during which the government surveyed households for May's unemployment rate. They increased between the April and May survey periods, suggesting an uptick in the unemployment rate this month. The jobless rate was at 4.2% in April.

Many people who have lost their jobs are experiencing long spells of unemployment. The median duration of unemployment jumped to 10.4 weeks in April from 9.8 weeks in March.

With profits under pressure, there is probably little incentive for businesses to boost hiring. Mass layoffs are, however, unlikely with a Conference Board survey of chief executive officers released on Thursday showing most captains of business anticipated no change in the size of their workforce over the next year even as about 83% said they expected a recession in the next 12-18 months.

Profits from current production with inventory valuation and capital consumption adjustments dropped $118.1 billion in the first quarter, the Commerce Department's Bureau of Economic Analysis (BEA) said in a separate report. Profits surged $204.7 billion in the October-December quarter.

Companies ranging from airlines and retailers to motor vehicle manufacturers have either withdrawn or refrained from giving financial guidance for 2025, citing the uncertainty caused by the on-again and off-again nature of some duties.

Businesses front-loaded imports and households engaged in pre-emptive buying of goods last quarter to avoid higher costs, making it difficult to get a clear picture of the economy.

The deluge of imports sent gross domestic product declining at a 0.2% annualized rate in the January-March quarter, the BEA said in its second estimate of GDP. The economy was initially estimated to have contracted at a 0.3% pace. It grew at a 2.4% rate in the fourth quarter.

Thomson ReutersUS gross domestic product

Other alternative measures of growth, gross domestic income and gross domestic output also showed the economy contracting at a 0.2% pace in the first quarter.

Source: TradingView

Daily Natural Gas

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Market Outlook: Neutral to Slightly Bullish if Heat Builds

Source: fxempire

The second release of first quarter real GDP growth was left broadly unchanged, showing a very modest contraction of 0.2% quarter-over-quarter annualized (previously -0.3%) – a tenth below the consensus forecast. Recall, this is a notable deceleration from the 2.9% annualized rate of expansion averaged over the prior two quarters and is the first quarterly contraction in three-years.

Consumer spending rose 1.2% (previously 1.8%), or roughly a third of the rate of expansion in the prior quarter. The downgrade was largely due to softer services spending (2.2% from 2.7%).

Non-residential fixed investment rose 10.4% (previously 9.8%), with a surge in equipment spending (24.7%) accounting for the bulk of the gain – reflecting companies ramping up purchases ahead of the tariffs. Investment in intellectual property products (+4.6%) was also healthy, rising at the fastest annualized pace in a year.

Residential investment was revised to a small contraction of 0.6% (previously +1.3%).

The bulk of the pullback in GDP came from net exports. Imports surged by 42.6%, largely owing to a strong gain in goods imports (53.3%). Meanwhile, exports rose by a more modest 2.4%, resulting in net trade subtracting 4.9 percentage points (pp) from headline growth. Roughly half of the uptick in imports showed up in inventory investment, which added 2.6pp to Q1 GDP.

Government spending contracted by 0.7%, as outlays from both federal defense (-7.1%) and non-defense (-1.2%) declined.

Final sales to private domestic purchasers – the best gauge of underlying domestic activity – expanded by a healthy 2.5%.

Real Gross Domestic Income (GDI) also contracted by 0.2% in the first quarter. Corporate profits fell 11.3% annualized or $118 billion after accounting for inventory valuation and capital consumption adjustments. However, this was partially offset by another solid gain in employee compensation (5.4%), which accounts for roughly two-thirds of total national income.

Key Implications

The second estimate of first quarter real GDP did not change the underlying narrative. Economic growth was heavily weighed down by a surge in import activity, as businesses scrambled to pull forward purchases ahead of the tariffs. Looking through the import shock, underlying domestic demand remained reasonably healthy, but this too likely captures behavior shifts related to tariffs in investment and consumer purchases, such as autos.

As of May 28th, the U.S. Court of International Trade struck down all of President Trump’s tariffs related to the International Emergency Economic Powers Act, including the Canada/Mexico/China fentanyl tariffs, the universal 10% tariffs currently in effect and the delayed reciprocal tariffs that were slated to come back into effect as of July 9th. The court ruling has no impact on sectoral tariffs, including the steel & aluminum and auto related tariffs. While the administration has already said that they plan to appeal the ruling, timelines remain unclear. At the very least, yesterday’s announcement weakens the U.S. position in trade talks that were underway with more than a dozen nations, most notably the EU and China.

Of the Q2 data released, there’s only moderate evidence that domestic spending has slowed in response to heightened trade uncertainty. But the pullback in Q1 corporate profits – the largest quarterly decline since Q4’2020 – is a warning sign that firms were coming under pressure, and this was before the bulk of the tariffs had even come into effect. Tomorrow’s release of the April personal income and spending will provide a more fulsome snapshot of how the consumer fared last month, and whether there’s any evidence of a softening in discretionary spending trends.

Source: ACTIONFOREX