The market mainly consolidated after yesterday's sharp price swings, which came on the G7 mix-up. After pushing for market determined rates and endorsing policies with domestic objectives, an unnamed official reclarified and said it did have an issue with Japanese policy. USD-JPY initially moved to a new trend high over 94.40 and then reversed later on in the session to trade under 93.00. As-expected, there was no appetite to take on big positions in Asia with the focus now on the G20. European stock markets advanced yesterday, led by Spain, and bond futures dropped, with the Bund underperforming as spreads narrowed sharply. So risk appetite seems to be back for now although markets have been fairly volatile over the last few weeks as political uncertainty in Italy and Spain cast yet another shadow over the future of the eurozone. After yesterday's bill sale Italy will issue bonds today and Germany auctions EUR 5 bln of 2-year Schatz notes. Eurozone production data is also due.

[EUR, USD]
EUR-USD traded within a narrow range after Tuesday's choppy action. It managed to consolidate N.Y. session gains and traded close to 1.3450 throughout the Asian session. The EUR crosses did see some profit taking, but this did not have a great deal of impact as the dollar was broadly lower. EUR longs may look to challenge 1.3500 on an intra-day basis. Good offers are widely tipped around that region now and some interest is reportedly related to fresh option positions that were recently established after EUR fell to 1.3325 lows.

[USD, JPY]
USD-JPY met selling pressure on upticks. After starting the session close to 93.50 it headed to 92.82 lows on repositioning by specs ahead of the BoJ policy meeting tomorrow and the G20 at the end of the week. Buyers under 93.00 were mostly offshore names after Japanese corporate bids put a floor in place from 92.70-80 ahead of more support into 92.50-60. EUR-JPY also pulled back from 125.65 towards 125.00 and eyes stops lower down. Japan are still expected to continue with the current policy path, which should encourage yen selling on upticks, but for now consolidation is likely to continue as players move to the sidelines.

[GBP, USD]
GBP rebounded on Tuesday from fresh trend lows around 1.5575 and headed back over 1.5650. It ran into good buying interest from corporate accounts and a supranational bank after funds forced a sharp move lower following the break of support at 1.5620 and barriers at 1.5600. Cable's inability to close under 1.5600 could indicate more sideways action, though today's BoE Inflation Report will be a market mover in this respect. It is expected to paint a poor growth outlook and could also raise the outlook for inflation.

[USD, CHF]
EUR-CHF has consolidated over 1.2300 after it jumped on Tuesday after SNB Jordan said the risk of extreme FX fluctuations continues to exist and it will maintain the ceiling on the CHF and take additional measures if necessary. After moving up from 1.2290 to 1.2350 it has maintained narrow ranges close to 1.2330-40. Buyers are now likely ahead of 1.2300, but there are build up of offers from 1.2350 to 1.2370, which are likely to reinforce the range bound tone.

[USD, CAD]
USD-CAD fell steadily on Tuesday, from just over 1.0085 in early North American trade to 1.0020 by the close. In Asia it extended to 1.0014, though support held amid interest from range players and talk of option related bids. The pick up in CAD$ was due to news that Canada's Nexen has received all necessary approvals to be taken over by China's CNOOC. The deal, worth about C$15 bln, is expected to close on February 25th, and could continue to weigh on USD-CAD. A break of 1.0000 is expected to trigger sell stops, while offers have been lowered in size from the 1.0040-50 area.