NAFTA lives

The biggest red herring in history

On the fringes of what was otherwise a fairly event-free day there was a classic example of bad news, good news. First, the Canadian dollar and Mexican peso retreated and then they recovered sharply. Both lost net ground to sterling but it could have been worse.

The bad news was a story that the US president was about to announce that he would be taking the United States out of the North American Free Trade Agreement. NAFTA does what it says on the tin, allowing free trade between Mexico, Canada and the States. The threat of its imminent abolition sent the peso and the Loonie -1% or more lower.

It all turned round when Mr Trump said he would not terminate NAFTA "at this time" but would speak with Mexican and Canadian leaders to renegotiate the treaty. The Loonie and the peso rallied strongly, regaining most but not all of the ground they had lost. The Canadian dollar is down by a dozen ticks on the day against sterling.

"The biggest tax cut in history"

That was how the US treasury secretary described the White House's proposals for tax cuts and reform. Whilst investors tend to be in favour of the plan, the treasury secretary's presentation amounted to little more than bullet points and there is a low level of faith in his ability to push them through Congress.

The idea of lower taxes, with fewer bands and the elimination of many deductions, is appealing to investors because it could indeed be positive for the economy. However, there was a distinct lack of flesh on the bones, to the effect that it all looked more like a wish list than a real proposal. The US dollar scraped together a third of a cent gain against the euro but lost a quarter of a cent to sterling.

All the while the pound was quietly building on the achievements of Tuesday. It was the day's top performer, strengthening by an average of 0.4% against the other dozen most actively-traded currencies and picking up two thirds of a euro cent. There were no statements or data to drive it higher: it simply had a good day.

ECB and GDP

The highlight today - though it might turn out to be a damp squib - will be the European Central Bank president's press conference at half past one. On Friday the focus will be on preliminary figures for first quarter growth in Britain and the United States.

It would be a surprise if Mario Draghi were to announce anything earth-shaking. Investors will, however, take careful note of his syntax, examining it for clues to when the ECB might be considering winding down its asset purchase programme.

Tomorrow's gross domestic product figures are expected to show Britain's economy expanding by 0.4% in Q1 and America's by 0.3% (annualised 1.3%). The usual rules apply: any appreciable divergence from those numbers will affect the currency concerned.