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Trump's Protectionist Rhetoric forces USD lower

BY BRETT OTTAWA

The Australian dollar edged higher through trade on Friday clawing back through 0.7550 as investors dissected President Trump’s inauguration speech. Trump’s 16 minute address failed to proffer a clear policy outline, instead the incumbent President opted to paint broader strokes, spruiking his America first policy but failing to delve into specifics. Trump’s focus on Protectionism concerned investors, as protectionism means a move away from trade agreements which are generally USD negative and this concern prompter renewed  nervousness and another bout of USD selling allowing the AUD to hold onto gains above 0.75 and touch intraday highs at 0.7563. Attentions now turn to Tuesday domestic CPI inflation data for direction through the week ahead.  

The New Zealand dollar crept higher through trade on Friday supported by uncertainty surrounding the state and path of U.S policy reform under President Donald Trump. The Kiwi moved back through 0.7150 to touch intraday highs at 0.7176 as Trump’s inauguration address failed to proffer a clear outline and policy platform when delivering on campaign promises across tax reform, infrastructure rebuilds and fiscal stimulus. Investors’ concerns that the 45th President will fail to deliver on growth have seen the USD has suffered significant selling and as a higher yielding asset in an environment of low or negative interest rates the NZD has enjoyed strong gains advancing some 3 cents in the month since Christmas. Attentions now turn to the first 100 days of the new President’s tenure in a bid to obtain concrete policy plans and not just “America first” rhetoric. 

Last week was certainly an interesting one for the Cable, having begun under 1.200 and advancing above 1.2400 on UK Prime Ministers Brexit speech ending uncertainty around a “hard Brexit”. The Pound managed to hold on to gains ending the week at 1.2368 despite economic data from the UK reporting Retail Sales had it biggest fall in four years for the month of December. Sales across all main retail sectors declined with the heaviest coming from non-food stores, the official reading was a 1.9% fall on the previous month. The main focus for the week ahead will be investors watching out for any policy announcements from President Donald Trump as he settles into the Oval office and all eyes will be on tomorrow’s Supreme Court ruling on Brexit. 

Following the inauguration of Donald Trump on Friday the greenback closed lower for the week resulting in the EUR/USD pair flirting around the 1.0700 level. US President Donald Trump inherits a US dollar that’s 14 percent stronger than when Barack Obama was sworn in as president eight years ago. The EUR/USD pair is currently trading at 1.0702. We now expect support to hold on moves approaching 1.0650 while any upward push will likely meet resistance around 1.0710. The USD/JPY pair closed the week marginally higher trading above 114.50. The Japanese calendar was quite light last week, however this week, we will see the release of Flash Manufacturing PMI, Trade Balance and National Core CPI.