Trump’s protectionist rhetoric: Dollar hits six-week low, gold touches 2-month high, European stocks tank

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Published: January 23, 2017 7:57:48 PM

President Donald Trump began his term in office with a protectionist speech that drove a nervous market into safe-haven assets.

The dollar fell to a 1-1/2 month low on Monday against an index of the world's other top currencies. (Reuters)The dollar fell to a 1-1/2 month low on Monday against an index of the world’s other top currencies. (Reuters)

President Donald Trump began his term in office with a protectionist speech that drove a nervous market into safe-haven assets. His inaugural address on Friday, signalling an isolationist stance on trade and other issues, led investors to retreat to the safety of higher-rated government bonds. “The focus is on the protectionist rhetoric and the lack of detail on economic stimulus, so it’s a nervous start (to the presidency),” said Investec economist Victoria Clarke.

Trump enters his first official week in the White House and works to begin delivering on his ambitious campaign promises. Trump has pledged to scuttle trade deals such as a pending Asia-Pacific agreement and overturn Obama’s executive order deferring deportations for 700,000 people who were brought into the country illegally as minors.

The dollar fell to a 1-1/2 month low on Monday against an index of the world’s other top currencies. The dollar index, which measures the greenback against six major rivals, fell almost half a percent to 100.28 led by a 1 percent drop to 113.51 yen and a 0.35 percent slide to $1.0750 per euro. “People had expected some kind of repeat of his (Trump’s) victory speech in November, but it was a bit confrontational and has sparked some concerns in the markets that he is going to play hard ball,” said Rabobank strategist Philip Marey.

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Gold rose on Monday, touching its highest in two months as unease over the economic policies of U.S. President Donald Trump pushed investors towards safer assets while the dollar and U.S. bond yields fell. Gold finished last week up 1 percent for its fourth straight week of gains and longest consecutive string of weekly increases since July.

Copper rose on Monday, buoyed by dollar weakness and hopes that U.S. President Donald Trump’s incoming administration would make good on a pledge to boost infrastructure spending in the world’s largest economy. The red metal used in construction has rallied 14 percent since the Nov. 8 election saw Trump voted into office on the back of promises to cut taxes and boost spending.

Trump has made it clear that he plans to hold talks with leaders of Canada and Mexico to renegotiate the North American Free Trade Agreement (NAFTA) and intends to withdraw from the 12-nation trade pact of the Trans-Pacific Partnership.

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