Forex Today: Risk flows dominate markets ahead of US data

Here is what you need to know on Thursday, May 29:

Markets turn risk-positive in the second half of the week as fears over an economic downturn in the United States (US) ease following a federal court's decision to block US President Donald Trump's 'Liberation Day' tariffs. The US Bureau of Economic Analysis will release its second estimate of the Gross Domestic Product (GDP) growth for the first quarter on Thursday. The US economic calendar will also feature weekly Initial Jobless Claims and April Pending Home Sales data.

The Court of International Trade announced late Wednesday President Trump's reciprocal tariffs will be blocked from going into effect, explaining that Trump overstepped his authority by imposing across-the-board duties on imports from the US' trading partners, per Reuters. Commenting on the use of tariffs as leverage, "that use is impermissible not because it is unwise or ineffective, but because federal law does not allow it," a three-judge panel said. The Trump administration has reportedly already filed a notice of appeal, questioning the court's authority.

The US Dollar (USD) gathered strength with the immediate reaction and the USD Index climbed to its highest level in over a week above 100.50. At the time of press, the USD Index was up 0.25% on the day at 100.12, while US stock index futures were gaining between 1.3% and 2%, reflecting the improving market mood.

In the meantime, the minutes of the Federal Reserve's May meeting showed that officials saw elevated uncertainty about the economic outlook. "Participants noted they may face difficult trade-offs if inflation proved more persistent while outlooks for growth and employment weakened," the publication noted.

Gold came under heavy bearish pressure in the Asian session and fell to its lowest level since May 20 below $3,250 before correcting higher. As of writing, XAU/USD was down 0.5% on the day near $3,270.

EUR/USD extended its weekly slide and came within a touching distance of 1.1200 before recovering above 1.1250 by the European morning.

GBP/USD continued to push lower toward 1.3400 in the Asian session on Thursday after closing the previous two days in negative territory. The pair regains its traction in the early European session and trades marginally lower on the day at around 1.3450.

Japanese Finance Minister Katsunobu Kato said on Thursday that he agreed with US Treasury Secretary Scott Bessent that exchange rates should be set by the market. Meanwhile, Japan's Chief Trade Negotiator and Economy Minister Ryosei Akazawa said that he wants to meet with Bessent to conduct ministerial talks and reiterated that they will continue to demand that the US reconsiders tariff measures. USD/JPY builds on its weekly gains and trades above 145.50, rising about 0.5% on the day.