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The stage is set for a high-stakes showdown in Washington as the Supreme Court prepares to hear arguments in November on whether President Trump overstepped his authority by imposing emergency tariffs through the International Emergency Economic Powers Act.
These duties, levied at rates ranging from 10 to 50 per cent on imports from Canada, Mexico, China, and beyond, drove the U.S. effective tariff rate to levels last seen in the 1930s.
They were projected to generate between 2.3 trillion and 3.3 trillion dollars over a decade, yet the legal challenge now threatens to unwind the entire structure and force a historic refund that could reshape fiscal planning for years.
If cancellation comes, the first impulse of equity markets would be to cheer. Companies that saw their margins thinned by inflated import costs would find sudden relief, with consumer electronics, auto parts, and agriculture leading the charge.
Inflation, which budget researchers estimate was lifted by 1.7 percentage points due to tariffs, could fall closer to 0.5 percent, loosening the grip that rising prices have held on the Federal Reserve. That shift would hand policymakers more freedom to cut rates, adding to momentum for equities.
In the first stage of adjustment, this is a market that rallies rather than collapses, with traders bidding up stocks that gain most directly from lower trade frictions.
The second stage of the sequence is less comfortable. Trump’s tariffs have already pulled in more than 150 billion dollars, but refunds linked to accrued collections and interest could reach 750 billion to 1 trillion dollars. That liability would hit a Treasury already facing annual deficits above 2 trillion dollars.
To fund it, more bonds would have to be issued into a market where supply is already heavy and debt-servicing costs are rising. Traders would likely demand higher yields to absorb the glut, and those yields would in turn ripple through the economy, raising borrowing costs for companies and households alike.
Equities may rally on disinflation in the short term, but higher yields could ultimately cap gains and drag valuations back down.
Currency markets will have to navigate a similar two-track adjustment.
In the near term, U.S. Treasuries remain the world’s premier safe haven, and even under fiscal stress global traders seek shelter in American debt. That demand would support the dollar, particularly if equity gains coincide with rate-cut expectations from the Federal Reserve.
That said, confidence could erode if the deficit continues to balloon. The dollar would then be forced to reprice, still strong in bursts of global risk aversion but softer on a structural horizon as traders demand greater compensation to hold U.S. paper.
For traders, the implications are clear. Expect a two-step process where markets first celebrate lower inflation and thinner trade costs, then wrestle with the heavier reality of fiscal strain. Volatility is likely to rise as the initial burst of optimism collides with swelling bond supply and higher yields.
The cautious forecast is that equities gain first, led by sectors most sensitive to tariffs, but face headwinds if bond markets push borrowing costs higher. The dollar may hold firm in the short run, but risks are tilted toward gradual softening if deficits remain unchecked.
Key movements of the week
A concise, trader-first read on where the pressure points sit across currencies, commodities, equities, and crypto this week. The map is drawn by levels already in play. The bias is driven by how the price behaves when it returns to each zone.
The dollar is still steering the wheel. USDX climbed from 96.60 and cleared 98.051 before pausing. The pullback is orderly so far, and the bias holds as long as 97.00 remains intact. Dips into the 97s are still the place to watch for buyers.
The euro and sterling are both struggling to keep traction. EURUSD fell through 1.16571 before rebounding, but rallies into 1.1745 or 1.1805 look stretched. GBPUSD carries the same weight, with sellers lining up near 1.3450 and 1.3505. For now, both pairs remain capped by fragile sentiment.
USDJPY keeps its bullish tilt. The push through 149.127 sets the tone, and any retreat into 148.75 or 147.75 is where momentum buyers are likely to re-engage. Dollar Swiss is also building higher ground, with 0.7950 and 0.7925 as natural springboards.
The commodity bloc is still under pressure. AUDUSD has been leaning lower from 0.6640, and NZDUSD mirrors the weakness, with sellers watching 0.5815 to 0.5860. The Canadian dollar, by contrast, is firming with the dollar, and 1.3900–1.3830 is the zone to watch for the next leg higher.
Oil’s breakout has hit resistance. Price cleared 66.442 but sellers stepped in quickly. The 64.60 handle is the line to defend if the uptrend is to hold. Gold is quieter, caught between 3835 overhead and 3690 below. Until one side gives, it remains a range-trader’s market.
Equities continue to climb. The S&P 500 bounced from 6576 and now eyes 6750 and 6840, though stretched valuations will test conviction if yields start pressing higher again.
Bitcoin, too, is settling into a range between 109450 support and 114200 resistance. With two-way flows in play, the market is waiting for a clean break before leaning hard in either direction.
Natural gas sits on the back foot after losing 2.92, with 2.73 the next level for dip buyers to try their luck.
Key events of the week
The calendar for the week sets a measured tone, with traders balancing central bank decisions against labour market data. Monday begins quietly, with no scheduled releases.
On Tuesday, 30 Sep, attention shifts to Australia and the United States. The Reserve Bank of Australia holds its cash rate steady at 3.60 percent, unchanged from the previous reading, while in the U.S. the JOLTS job openings survey is forecast at 7.15 million compared with 7.18 million previously.
These releases are expected to support consolidation in AUDUSD before fresh downside and could allow the dollar index to continue edging higher, though some stalling is possible.
Wednesday, 1 Oct, brings the ISM Manufacturing PMI, forecast at 49.1 versus 48.7 last month. A modest improvement would leave the index still below the 50 threshold, but if the dollar completes its consolidation phase by then, the release could provide the next impulse higher for the greenback.
Friday, 3 Oct, is the focal point. The Bank of Japan governor is due to speak, a reminder of yen policy sensitivity after recent weakness.
In the U.S., the September nonfarm payroll report is expected to show a sharp rebound with 51,000 new jobs compared to just 22,000 previously. The unemployment rate is seen steady at 4.3 percent. This combination may reinforce the dollar’s strength itrader-firstf the labour market shows resilience, though structure remains key as traders look for confirmation of trend.
Looking beyond the immediate horizon, the following week brings the Reserve Bank of New Zealand’s official cash rate decision on 8 October and the University of Michigan’s preliminary consumer sentiment survey on 10 October, both of which could add another layer of volatility to dollar pairs.
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