Up there again

Dollar down

Another day, another executive order from the US president. The one grabbing the headlines on Wednesday was to build a 2,000-mile-long wall on the Mexican border. Mexico was unimpressed, as were currency traders. For the third time this week the dollar was the day's biggest loser.

Equity investors were not put off: Global share indices are a sea of green this morning and America's Dow Jones 30 index has at last managed to surmount its 20,000 obstacle after a month of effort. But the US dollar is down by a cent and a half on the day, leaving it -3.1% lower on the week against sterling.

Whilst investors are still inclined to see upward potential there is an increasing sensation that the long-dollar position is what some describe as a "crowded trade". Almost everybody is in it and those that aren't would like to see lower levels before they make their play. The talk of parity for euro/dollar is becoming more muted and Cable's double bottom at $1.20 is looking more secure.

Sterling wins again

For the second time this week the pound showed the other major currencies the way, strengthening by an average of 1.7%. Its advantage this time was Downing Street's announcement that it will produce a white paper ahead of the parliamentary vote on Article 50.

Investors had presumed that the government would present parliament with something akin to a one-line bill, along the lines of "this house believes that Article 50 should be activated". That might still be the case but the additional release of a white paper will provide insight into the government's plans for the period during and after Britain's departure from the EU.

Sterling's movement in the last couple of weeks has demonstrated that government transparency goes down better with investors than opacity. News of the white paper was worth an instant half-cent to the pound. It went on to secure net daily gains of one and a half US cents, one euro cent and one and a quarter Japanese yen. Sterling is an average of 1.7% higher on the week and 4.3% stronger on the quarter.

Inflation and growth

The Kiwi enjoyed a temporary boost overnight after a higher-than-expected print for NZ inflation but that was the only ecostat to have a material effect on exchange rates over the last 24 hours. This morning's preliminary figures for UK gross domestic product could have an impact on sentiment towards sterling.

At 1.3% in December New Zealand inflation beat the forecast 1.2% and was nearly a percentage point higher than it had been three months previously. The Kiwi rallied more than a cent before gradually handing back all of its gains.

Britain's GDP is predicted to have expanded by 0.5% in the fourth quarter of 2016, putting growth for the calendar year at 2.1%. Other data today cover Swedish unemployment, UK retail sales (the CBI measure) and US new home sales.