Davos, it is said, doesn’t know quite what to make of Donald Trump. On the one hand, there is outrage, stemming from the POTUS’ decision to pull out of the Paris Climate Agreement, his outspoken views on immigration, and his deeply unpopular and controversial domestic policies.
On the other hand, Trump has, so far, been undeniably good for the economy. Under his leadership the Dow Jones and S&P 500 have hit record highs, and domestic economic growth is impressive. These are the kind of achievements that attendees at Davos appreciate; it makes their jobs easier, and makes them wealthier, too.
Trump, it seems, has been particularly adept at restoring relations with the UK this week.
Relations had become as frosty as a Swiss winter, in the light of Trump’s re-tweeting of propaganda posted by the hated anti-Muslim Britain First group, his cancellation of a planned trip to London, and a host of other political faux pas, whether deliberate or otherwise.
But after agreeing to be interviewed by Piers Morgan, the choice of interviewer aside, perhaps, Trump has seemingly repaired some of the damage. He has, it is reported, apologised for the tweets, agreed to a trip to England and a visit to Buckingham Palace to meet the queen, and emphasised his love of all things British.
It could represent good news, and good timing, for both sides of the Atlantic.
Data released this week indicates that, despite Brexit, the UK is performing better than expected. Figures released yesterday show that UK growth in Q4 beat forecasts, rising to 0.5% when it had been expected to remain at 0.4%. Over the whole year, although growth slowed, it fell less than predicted, to 1.5%, from 1.7%, rather than to 1.4% as was predicted.
The news drove the price of the pound up slightly against the euro, but strongly against the dollar, to reach 1.425 early this morning, climbing from 1.39 at the beginning of the week.
Again, this suits both sides of the Atlantic. The US wants a cheap dollar to encourage other countries to invest in its products and services. This is a key Trump policy – he has long maintained that a weaker currency is the reason why China attracts so much investment form overseas and wants the US to adopt the same policy.
The UK needs reliable trading partners if it is going to survive Brexit, and the US is an obvious potential ally in that respect. Trump has promised the UK that the US will be ready to negotiate a new trade deal between the countries as soon as Brexit has been concluded, which may please Theresa May, for one, as she doggedly pursues the divorce from the EU that she believes is right for the country.
A return to the days of the “special relationship”? Not quite perhaps, but anyone with an interest in currency hedging, trading with the US or moving money there for any other reason, should be thinking about acting now.
Trump’s first year in office has been a largely dispiriting one, but he has delivered on one promise, to stabilise and improve the US economy. For that, Davos is thankful.
Will it last? The overall state of uncertainty makes the recent wave of better than expected newsflow even more welcome, and significant for currency and market watchers.