The dollar charged to an nearly 14-year high and government bond yields rose sharply on Thursday, after the Federal Reserve hiked USA interest rates and signalled more would follow at a faster pace next year.
USA bond yields had already begun moving higher following Trump's victory and as expectations of the Fed rate increase solidified.
Additionally, the dollar surged after the Fed's interest rate decision. The advance came after the Fed indicated three more rate hikes next year instead of two.
FXTM chief market strategist Hussein Sayed said the Fed's hike, was largely priced in by the market but the central bank's forward guidance is taking its toll on commodities. The central bank slashed rates in 2008 as the economy was buckling following the financial crisis, hoping to shore up growth by encouraging consumers and businesses to borrow.
Economic data on Thursday showed US consumer prices moderated in November, but the underlying trend continued to point to firming inflation pressures.
James Marple, senior economist at TDBank, said the Fed's forecast of three rate increases next year, up from two, was the "only real surprise" Wednesday.
US Treasuries yields rose as far as 2.61 per cent, having already risen more than 0.7 per centage point since Trump was elected last month.
Wednesday's action signaled the Fed's belief that the economy has improved over the past year after a rough start to 2016 and can withstand slightly higher borrowing rates.
The interest rate that the Fed controls affects what banks pay to borrow money from each other.
It's only the second time in eight years the Fed is raising the key rate, which hovered between 0.25 percent and 0.50 percent since December 2015. Now that the labor market has reached a nine-year low of 4.6 percent, the Fed is beginning to normalize the rate by hoisting it back up to around 2.5 percent through a series of 0.25-percentage-point increases. And she downplayed any expectations that Trump's economic program could lead to faster rate hikes resulting from higher inflation.
The Fed's policy meeting was the first since the United States election victory of Donald Trump, who investors expect to drive up inflation and boost growth with a program of huge fiscal expansion.
"I think the unemployment rate will end 2017 below 4.5%, and that risks to core inflation are skewed modestly to the upside of the 1.8% median forecast", Levenson said.
Yellen also made some headlines by indicating in her news conference that she intends to serve out her four-year term as Fed chair until early 2018 - even after President-elect Donald Trump made critical comments about Yellen on the campaign trail.
Stocks have been on a tear in recent weeks on speculation the incoming Trump Administration will pursue tax cuts and increase infrastructure spending.
"The fact that the market, including me, was leaning the wrong away exacerbated the move", said Steven Englander, Citi's global head of forex based in NY. A year ago at this time, for example, the Fed predicted it would raise rates four times in 2016.