FX action occurred early in the session, as EUR-USD got things started by falling under 1.3300, from 1.3370. The moved was seen as a result of ECB comments, where an official said he doesn't expect the LTRO repayment to affect the EONIA rate Some traders think that expectations of heavy bank repayments may have exacerbated recent EUR strength. The dollar perked up broadly in morning trade, firming against most majors. The risk backdrop was slightly negative early on, though equities posted modest gains in afternoon dealings. Conditions dried up after London's close, as U.S. players prepared for a long weekend. On the economic calendar, the only release was Michigan sentiment, which was softer than forecasts. This said, there was little market impact.

[EUR, USD]
EUR-USD dropped sharply to 1.3300 from 1.3370 early in N.Y. The move was pinned on comments from ECB's Coeure, who said he doesn't expect the LTRO repayment to affect the EONIA rate. However, Coeure would not offer an opinion on whether banks should pay LTRO. Some traders think that expectations of heavy bank repayments may have exacerbated recent EUR strength. Short term funds that trade off headlines exacerbated the downturn after stops gave way at 1.3330. Coeure also said the ECB takes foreign exchange rates into account, but it is not an objective in itself. EUR-USD turned choppy after the move on 1.3300. More than one name in London saw interest from a large Middle Eastern name, which lifted it out of 1.3300 back to 1.3330, but German account sell interest went through related to fixing orders, capping gains. The pairing based at 1.3285, before settling above 1.3310 in afternoon trade.

[USD, JPY]
USD-JPY lost some ground on profit taking after the European open, but the Japanese policy outlook limited moves. USD-JPY was unable to trade higher than 90.15 since European trade got underway and headed to 89.68 pullback lows after very good fund selling pressure by EUR-JPY. The cross fell from 120.70 to 119.63 lows and then steadied close to 120.00. USD-JPY movement slowed by the N.Y. open, but sources noted very good real money bids into 89.50, 89.30 and 89.00. The pairing was mostly supported through the session, moving to highs of 90.10, after basing at 89.75.

[GBP, USD]
Cable fell to intra-day lows under 1.5925 after weaker than expected U.K. retail sales. The move was relatively mild though, largely due to a build up of short positioning from intra-day accounts, as well as support in front of the 200-dma around 1.5910 today. Sterling continues to fair badly on persistent fund selling, which has been most pronounced against the EUR, which drove the cross over 0.8385 today. Cable has posted its biggest weekly drop since last July, while on trade weighted basis GBP is around nine month lows. Sterling has been weighed of late by rating downgrade risk, EU exit concerns and weak fundamentals.

[USD, CHF]
EUR-CHF retraced the overnight rally on fund profit taking and corporate demand for swissy. The cross fell sharply from 1.2520 and forced out weak longs under 1.2500 to register intra-day lows around 1.2455, leaving it well below today's trend highs of 1.2568. The recoil in EUR-CHF mirrored corrective action across the JPY crosses, with repositioning underway after some of the sizeable moves this week. EUR-CHF price action look mobile though and one leading Swiss name has readjusted a long EUR-CHF trade to target 1.2750 from an intial target of 1.2550. We expect dip buying to continue, with barriers at 1.2575 and 1.2600 a target intra-day.

[USD, CAD]
USD-CAD showed little initial reaction to the stronger manufacturing shipments and orders, hovering just under 0.9900. The pairing finally moved out of its narrow and familiar range overnight, edging up to 0.9910 from around 0.9860 at Thursday's close. Stops were a factor over 0.9880, while it seemed offers noted at the level over the past week, were no longer in place. Dealers saw support a 0.9880, though accounts which went long USD-CAD on the move up over 80 will likely be quick to bail out should the level give way again. That was not an issue however, as USD-CAD made steady upside progress through the morning session, peaking over 0.9945. Stop loss driven interest dominated the buying interest. We heard talk of model funds "stopping into" fresh longs on the break over 0.9910, while corporate buyers, which had been sitting on bids near 0.9820, were active buyers over 0.9920. The next upside target will be 0.9970, representing the highs seen in late December.