Market wrap: Trump's protectionist tone in inauguration speech weighed on USD  - Westpac

Analysts at Westpac offered a market wrap.

Key Quotes:

Global market sentiment: The US dollar, yields and equities rose in the NY morning then fell in response to the protectionist tone of President Trump’s inauguration speech. Gold and oil rallied while GBP and CAD were hit by soft retail sales and CPI data respectively. AUD and NZD recovered most of London morning losses.  

The S&P 500 had a strong morning, sitting up 0.5% as President Trump began his inauguration speech. It fell sharply to lows just above flat on the day, perhaps in response to the strongly protectionist rhetoric, then chopped around and closed up 0.3%, extending to 7 sessions an alternation between gains and losses.

Interest rates: US 10yr treasury yields resumed the mid-week rise to 2.51% (high since 3 Jan) in the NY morning but began to fall during Trump’s inauguration speech, later extending to 2.47%, little changed on the day. The 2 year treasury yield rose to 1.24% but then tracked down to 1.19%. Fed funds futures rates fell by 1-3bp along the curve, still fully pricing the next rate hike to be in July.

Currencies: The US dollar index rallied into the NY morning but failed at 101.50 and closed at 100.80, -0.4% on the day. Its key component the euro bounced off lows around 1.0630, oscillating during the Trump speech and closing just above 1.07. USD/JPY rolled over from a London high of 115.37 to a low of 114.24 in the NY afternoon, closing at 114.62, watching US yields and equities. AUD/USD fell in line with US dollar gains in the London morning, from 0.7560 to a low of 0.7517, chopped around 0.7530-55 as Trump spoke, then closed at 0.7555 . NZD/USD slid under 0.7200 after the NZ close, as far as 0.7129, later trimming losses to 0.7170 as the US dollar faded. AUD/NZD bounced from under  1.0500 to 1.0540."