The European morning was relatively quiet. EUR continued to find buyers on dips, leaving it stable ahead of 1.3300 ahead of the N.Y. open and Cable recovered from 1.5802 lows on option related demand and a better than expected U.K. claimant count. The BoE minutes met expectations, but mentioned that GBP was too richly priced in trade weighted terms. GBP hit more than nine-month lows on a trade weighted basis on Tuesday. JPY edged a lower in Europe after adding further gains on more post-BoJ profit taking in Asia, which forced USD-JPY into 88.00-10. AUD-USD dipped under 1.0550 overnight after a benign CPI reading, but selling pressure was absorbed by good reserve management demand. The highlight in North America is the BoC decision, where a steady hand is expected and it should maintain language that supports an eventual withdrawal of stimulus.

[EUR, USD]
EUR-USD found buyers under 1.3300, where an Asian sovereign name was noted. Adding to the supportive EUR backdrop was a revised 1.4000 target by a bulge bracket U.S. bank that called for 1.3700 just a week ago on reduced eurozone tail risk. Portugal's five-year syndicated issue is also euro supportive and it is the first time Portugal is back in the bond market since it received a bailout in 2011. EUR made it back to 1.3345, but may not travel far on the topside due to a good size 1.3300 expiry today. Overall, EUR is still confined to the broad 1.3250-1.3400 trading range.

[USD, JPY]
USD-JPY was underpinned by real money bids in early Europe ahead of 88.00 after another round of yen demand went through in Asia from 88.70. Overnight movement was in tandem the Nikkei 225, which dropped 2.3% on more post-BoJ profit taking. The JPY crosses were also pressured by speculative selling, which forced EUR-JPY from 118.20 to 117.05, though it backed it up through 117.80 on general EUR support. Japan PM Abe continued to talk tough against excessive yen strength, but there was no market reaction now that the BoJ policy meeting is behind us.

[GBP, USD]
Cable bottomed out ahead of 1.5800 in early Europe amid good Middle Eastern demand and then squeezed to session highs over 1.5875. An unexpected fall in the U.K. December claimant count and the BoE minutes, which revealed an 8-1 vote in favour of keeping QE unchanged at GBP 375 bln, supported sterling. The BoE said that recent data strengthened some members belief that no more QE was needed. However, it also argued that sterling may have exceeded levels compatible with the necessary rebalancing of the economy. In recent sessions many commentators have warned over potential sterling weakness due to poor economic fundamentals. MS is the latest bank to issue a forecast for further weakness, while leading bond managers have also warned that sterling could be heading for a perfect storm if gilts see a reduction in foreign investor demand as the eurozone recovers.

[USD, CHF]
EUR-CHF bargain hunting went through after it headed into 1.2350. Asian accounts sold into strength after it closed under 1.2400 during Tuesday's N.Y. session. However, once the European session got underway Swiss and German names lifted it back up to 1.2390. Since EUR-CHF broke out of the 1.2000-1.2100 range it has closely tracked repositioning via yen-funded trades and this tended to guide action today. The cross is still correcting overbought levels, yet longs are still positioned for a move back over 1.2500. However, the success of this trade will largely depend on whether the eurozone can sustain the improved conditions seen since the start of the year.

[USD, CAD]
USD-CAD backed away from the 0.9945 area on Tuesday due to a congestion of sell orders. The lack of movement around 0.9945 was pinned on option related activity. There are rumors that 0.9950 could be an options level and there are are confirmed barriers at 0.9975 and 1.0000 that will be well defended. We anticipate sideways to slightly higher levels in the very short term, with last Friday's break higher still supporting via positive short term indicators. However, positions are lower than average ahead of the BoC policy meeting. A test on 0.9900-05 in Europe failed to break near-term support.