Dollar flat after court strikes down Trump’s tariffs

The dollar was flat on Monday after the U.S. Supreme Court's decision to strike down President Donald Trump's tariffs added to uncertainty in markets that were already unsettled by the possibility of a conflict with Iran.

The dollar was steady against the euro at $1.1782, while sterling rose 0.1% to $1.3485. The dollar was also 0.1% lower against the Japanese yen, at 154.84.

"These initial moves appear to be knee-jerk reactions to headlines rather than true signals of fundamental change in the global economic landscape," said Invesco's chief global market strategist Brian Levitt.

"The markets' initial reaction to the ruling may ultimately be short-lived, given that multiple avenues can be pursued to keep tariffs in place."

BLANKET 15% LEVY

The Supreme Court ruled on Friday that Trump had exceeded his authority, prompting him to lash out at the court and announce a blanket 15% levy on imports. 

He also insisted that higher-tariff deals with trade partners should stay.

The uncertainty complicates an already unsettled backdrop for forex markets, as traders deal with shifting interest rate expectations and geopolitical concerns.

Trump's replacement levies will run for 150 days.

At the same time, it is unclear whether the U.S. owes importers refunds on duties already paid. The Supreme Court did not rule on that issue.

Analysts expect years of litigation and confusion.

In the immediate term that could paralyse markets as Trump seeks other means to replace the global tariffs more permanently.

The European Commission demanded on Sunday that the U.S. stick to a deal reached last year with the EU that includes zero tariffs on some products such as aircraft and spare parts.

U.S. trading partners in Asia and elsewhere assessed the uncertainties.

INVESTORS MONITOR MIDDLE EAST TENSIONS

The risk of a military conflict between the U.S. and Iran has added to nervousness on financial markets. 

While the longtime adversaries are scheduled to hold a third round of talks on Thursday on their nuclear dispute, Trump has ordered a buildup of forces in the Middle East.

"Escalating tensions in the Middle East have revived questions about geopolitical hedges and the FX impacts of a commodity price shock," Goldman Sachs analysts wrote. 

Iran is among the world's biggest oil producers, and any strikes on it are likely to upset the crude markets. 

A conflict could disrupt shipping routes as Tehran has previously threatened to shut the Strait of Hormuz, which carries a fifth of global oil flows.

Goldman analysts said the Swiss franc was their preferred inflation hedge. 

The franc has strengthened by nearly 2% against the dollar this year and last traded at 0.7765 francs per dollar.

(Reporting by Niket Nishant in London and Tom Westbrook and Rae Wee in Singapore; Editing by Stephen Coates, Kate Mayberry and Barbara Lewis)