Sterling surge and why US politicians are hurting the FTSE 100

Donald Trump joins Theresa May in Davos today, the first US president to hit the frozen Swiss town since 2000. Criticised as an exclusive but irrelevant talking shop, both Trump and May are quite capable of moving financial markets with comments made when they meet at the Alpine resort on Thursday.

US Treasury Secretary Steven Mnuchin has been talking down the dollar, which has already given Wall Street's overseas earners a huge boost, triggering fresh highs overnight. Given growing concerns around US protectionism and only a temporary resolution to the US shutdown, it would be a big surprise to see the dollar recover much this month.

If American tough talking turns to action beyond recent levies on imported solar panels, life could get harder for the global economy and US companies and give equity traders a good excuse to start banking at least some profit.

Sterling is up as much as 6% against the greenback in the past fortnight to over $1.43, never good news for FTSE 100 multinationals whose foreign income is now worth less in pounds and pence.

Trading at levels common in the months before the EU referendum, interest rate expectations and economic data remain supportive of sterling. With Brexit trade talks not due until March, and in the absence of negative catalysts, there's a five-week window for the pound to go higher still.

For the FTSE 100, the magnetic attraction of 7,600 or lower could prove too difficult to avoid. A hoped-for bounce from there will potentially decide whether we see a high at or above 7,800.

Attention will shift temporarily to the European Central Bank at lunchtime Thursday where traders will hope for further clarity on stimulus withdrawal and thoughts on the local currency.

After getting caught up in the fallout from Carillion's collapse, construction firm Kier Group is popular again after meeting expectations for the past six months. It already has enough work to keep it busy through 2018 and beyond, and further confirmation that it's taking over joint venture contracts with Carillion is reassuring.

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