Dollar tumbles on Trump's new 10% tariff vow; gold gains amid deficit fears

The ruling, which stated Trump exceeded his authority by invoking emergency powers for "reciprocal" tariffs and those targeting fentanyl trafficking, is expected to boost the US budget deficit, further weighing on the dollar. Immediately following the decision, President Trump announced his intention to impose a new 10% global tariff under Section 122 of the Trade Act of 1974, in addition to existing Section 232 and 301 tariffs.

However, Section 122 tariffs are temporary, lasting only 150 days without Congressional approval. The dollar's losses were somewhat limited by stronger-than-expected Dec core PCE price index data and hawkish comments from Atlanta Fed President Raphael Bostic, who advocated for mildly restrictive interest rates. Despite this, weaker US economic indicators like Q4 GDP and manufacturing PMI also contributed to the dollar's decline.

Meanwhile, gold and silver prices rallied, reaching one-week highs, driven by heightened geopolitical risks in the Middle East and the perceived increase in the US budget deficit due to the tariff ruling, boosting demand for precious metals as a safe haven and store of value.