Morning Note: Trump Tariff Swings; Tokyo Inflation Spikes; US PCE Eyed

Trump Tariff Rulings Cloud Trade Outlook

Investor sentiment whipsawed on Thursday following conflicting U.S. court rulings on former President Donald Trump’s tariffs. Markets initially rallied after a trade court ruled that most of the tariffs were unlawful late Wednesday. However, optimism faded when a U.S. appeals court reinstated the duties just before the close of Wall Street, intensifying uncertainty. The legal back-and-forth has further clouded an already murky outlook. While the administration may still pursue other legal paths to enforce tariffs, the developments could impact U.S. trade negotiations, timelines, and strategy with key partners.

(S&P 500 Index Daily Chart, Source: Trading View)
From a technical analysis perspective, the S&P 500 index has been in a bullish trend since early April 2025, rebounding from the support zone of 4,900 – 4,960, as evidenced by a series of higher highs and higher lows. Recently, it broke above the swap zone of 5,800 – 5,850, retested it, found support, and continued moving upward. This valid bullish structure may potentially drive the index toward a retest of the resistance zone at 6,100 – 6,150.

Tokyo Inflation Hits 2-Year High, BOJ Faces Rate Dilemma

Core inflation in Tokyo rose to a more than two-year high in May, driven by persistent food price increases. The core consumer price index, excluding fresh food, climbed 3.6% year-on-year, above the forecasted 3.5% and up from 3.4% in April. It marked the fastest annual rise since January 2023 and exceeded the Bank of Japan’s 2% target for a third straight year, reinforcing pressure on the BOJ to consider further rate hikes.

However, April’s drop in factory output highlights growing strain on manufacturers from weak global demand and steep U.S. tariffs. While rising service prices support the BOJ’s tightening bias, uncertainty around U.S. policy complicates the timing of future hikes. Delays could risk missing the window, especially if inflation trends shift.

(USD/JPY Daily Chart, Source: Trading View)
From a technical analysis perspective, the USD/JPY currency pair has been in a bearish trend since the beginning of January 2025, as indicated by a series of lower highs and lower lows. Recently, it rebounded from the support zone of 141.80 – 142.30 but faced significant bearish pressure and failed to form a higher high. As a result, this ongoing bearish momentum may potentially drive the pair lower to retest the support zone at 141.80 – 142.30.

Investors Await U.S. Core PCE Price Index Data

In March, the U.S. Core PCE Price Index rose 2.6% year-over-year and 0.0% month-over-month; April’s expectations hold the YoY rate steady at 2.6%, while the MoM rate is projected to rise to 0.2%. The unchanged YoY figure suggests inflation remains stable but still above the Fed’s 2% target, reflecting the ongoing effect of tight monetary policy. The anticipated monthly increase likely reflects short-term factors such as firmer service prices or wage-driven cost pressures, without indicating a reversal of the broader disinflationary trend. This data is set to be released today at 12:30 GMT.

(U.S Dollar Index Daily Chart, Source: Trading View)
From a technical analysis perspective, the U.S. Dollar Index has been in a bearish trend since mid-January 2025, as indicated by a series of lower highs and lower lows. Recently, it rebounded from the support zone of 98.40 – 98.70 but was rejected at the swap zone of 99.85 – 100.15, signaling that bearish momentum persists. Therefore, a decisive break of either the swap zone or the support zone may potentially determine the index's next directional move.

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