Why FTSE 100 just hit 2017 low

London's first trading session with Donald Trump leading the Free World started badly. A slump in the dollar to a five-week low versus the pound wiped 67 points, or almost 1%, off the value of the export-driven FTSE 100.

Seems Trump's inauguration speech rattled dollar bulls. Markets want detail on policies promised to stimulate growth in the US economy. What they got was a protectionist rant that raised the prospect of a series of messy trade wars.

A fan of a weaker dollar and "America first" approach to trade, there is clearly some contradiction in Trump's policies. Heavy spending on growth would clearly drive both interest rates and the dollar higher still.

There's also great anticipation this week ahead of Trump's meeting with Canadian president Justin Trudeau. The US president has made renegotiating the North American Free Trade Agreement (NAFTA) between Canada and Mexico a priority.

And, on Friday, our own Theresa May gets an audience with The Donald. Having been at the back of Obama's queue, she'll be praying that Trump comes good on his promise to fast-track a deal with the UK. If Brexit goes badly, trade with the US will become more crucial than ever.

If evidence were needed that blue-chip gains since the EU referendum were dollar-related, check out the greenback's slide in recent sessions.

A week ago, the pound sank to $1.1986, its lowest since June when the Brexit vote sparked panic on currency markets. Since last Monday, it's up 4% to $1.2471.

It was no coincidence that it's been a week since the FTSE 100 hit a record high, at 7,354. This morning it briefly traded down at 7,131, a three-week low and down 3% from its peak. That 7,131 level - also near last October's previous best - planted a kiss on the trendline up from the April 2015 high.

Technical analyst and Interactive Investor contributor Alistair Strang is positive overall, but admits he'll be concerned if the FTSE 100 closes below 7,145.

At around midday, the leading index had clawed back half Monday's early losses, led by a fightback among financials including insurers Old Mutual and Prudential. Banks like Lloyds Banking Group are off their worst levels too, and miners have done well to hold onto strong gains, underpinned by the struggling dollar.

Housebuilders received a lift following talk over the weekend that major shareholders have tried to engineer a merger between Bovis Homes and Berkeley Group. It seems a long shot given Berkeley, still chaired by influential founder Tony Pidgley, is said to have rejected the idea.

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