FX round-up: Some analysts warier on Washington

Sterling was one of the worst performers at the beginning of the week as a survey from the Confederation of British Industry pointed to economic activity coming off a year-end 2016 spike, against a sharply risk-off environment.

The Confederation of British Industry´s Growth Indicator fell from a reading of +17% for the three months to December to +10% in January, although that was still a stronger reading than the +9% seen in November and the +8% print for October.

Acting as a backdrop, the news-flow over the weekend was dominated by the confusion surrounding the exact details of the new US president's executive order on temporary measures governing the entry of refugees and immigration from several countries where jihadist activity was considered by Washington to carry national security risks.

At one point, it appeared that even those who had already obtained so-called 'green cards' - which grant permanent residency rights in the US - would be subject to the new curbs.

Commenting on those events, Michael Every, Head of FMR Asia Pacific at Rabobank, told clients: "For markets, the most important thing to glean from this latest barrage of Trump news is not just that, as Bloomberg states, “Confusion Grips Airports as Courts Limit Trump Travel Curbs”, nor that the new administration seem either accidentally or deliberately chaotic, which is usually a negative for sentiment.

"Even arguments for and against the executive order itself are secondary. The real underlying issue must surely be if the market’s belief - and continued pricing for - a politically liberal, economically neo-liberal global economy regardless of who is in office is still appropriate."

Amid that news-flow, cable was down 0.49% to 1.2492.

Interestingly, the US dollar was trading 0.5% lower to 0.9940 versus the Swiss franc even as the US dollar spot index was to be seen drifting down by a lesser 0.11% to 100.42, having earlier traded on the front-foot.

Among the other major crosses, and reflecting the dent to investors' 'risk appetite', euro/dollar was ahead by 0.12% to 1.0708 while US dollar/yen was off by 1.42% to 113.48.

Worth noting, the day's gyrations in currency markets came ahead of the Bank of Japan's policy meeting the next day and those of the US Federal Reserve and Bank of England on Wednesday and Thursday, respectively (as well as the monthly US jobs report on Friday).

Strength in the yen was apparent despite Bank of America-Merrill Lynch having decided to upgrade its view on the US dollar/yen cross, forecasting that it would now peak at 122.0 in June before retreating to 117.0 by the end of the year.