FX round-up: Euro and yen set to strengthen, Citi says

Cable regained its composure following a late-Friday evening swoon on the back of remarks from the Foreign Secretary that Brexit negotiations would probably start in the early part of 2017.

As of 1744 BST the euro was at 0.8672 versus the pound and trading just a smidgen below its year-to-date highs.

On 23 September, Boris Johnson told the BBC the Article 50 letter would be produced "probably in the early part" of 2017.

In other news, loans for home purchases in the UK slipped to 36,997 mortgages in August (consensus: 37,100), according to the latest tally from the BBA.

More significantly, a survey by CBI and PwC showed optimism among financial services firms during the three months to September dropped for the third consecutive quarter. More than half of the firms surveyed saw the Brexit vote as a negative for the financial services industry.

A separate survey by advisory firm KPMG revealed more than 75% of British business leaders have said they are pondering moving their businesses overseas because of the EU referendum.

Dollar/yen on the other hand fell sharply, sliding 0.75% to 100.25.

Of interest, in a research note sent to clients Citi said signs were firming that the US dollar had peaked "in line with the classic five to six year appreciation cycle."

The shift away from focusing on FX by key central banks meant the overshoot relative to rate differentials would now be more in play, the broker's analysts said.

"The single currency still shows similarities in trading patterns, flows and valuation to the 1999-2002 period. If this continues our forecast of a breakout to a new 1.15-1.20 range may be too conservative. The JPY was torn between fundamentals that supported upside and further BoJ easing. With the BoJ steering away from FX as its transmission mechanism, we continue to see USD/JPY falling to sub 100, slowly correcting its undervaluation.

"Overall, we see EMFX vs. USD as fairly stable over the next 12m, with a slight upside bias."

Euro/dollar was higher by 0.25% to 1.1253.