Market wrap: dollar lower despite Yellen's hawkish speech - Westpac

Analysts at Westpac offered a market wrap.

Key Quotes:

"Global market sentiment: In the key event for markets on Friday, Fed Chair Yellen’s speech signalled a March hike as likely but only gradualism beyond. US interest rates peaked moments after the speech, falling into the close along with the USD.

Interest rates: US 10yr treasury yields spent most of the Ldn/NY session rising in anticipation of Yellen, from 2.47% to 2.52% (the high of the past month), but retraced to 2.48% after the speech. 2yr yields similarly rose from 1.30% to 1.34% before slumping to 1.30% at the close. Market pricing for a March hike did firm though, April Fed fund futures at 0.86% implying around a 95% chance of a rate hike in March (yesterday it was at 90%). There was also Fedspeak pre-Yellen from Fischer, Lacker, Powell and Bullard, the latter adopting a lonely dovish posture but largely ignored by markets.

Currencies: The US dollar index closed 0.7% lower. EUR performed well, perhaps lifted by news of French populist Le Pen’s slippage in the polls in favour of independent Macron. It rose from 1.0520 to 1.0624. USD/JPY rose from 114.10 to 114.75 pre-Yellen, falling to 113.76 after. AUD bounced off the 0.7545 area to 0.7598. NZD fell from 0.7045 to 0.7003 – a two month low – before recovering to 0.7046 near the close. AUD/NZD pressed higher, from 1.0720 to 1.0822 – the highest since May 2016."