The dollar held steady overall, with risk appetite still comprised by the weaker data out of the eurozone and the weekend Italian election. EUR-USD was supported briefly by German Ifo strength, but EU cut the eurozone growth forecast to -0.3% from 0.1% previously for 2013 and the LTRO repayment announcement was much weaker than expected, which fueled a EUR move into 1.3160. GBP had a better session on short covering, leaving Cable in a tight range close to 1.5250 after it corrected a move to 1.5320 in Asia in thin conditions. JPY met selling pressure on upticks in early trade amid hopes that the BoJ Governor candidate will be aligned with government policy and lead to more stimulus. However, USD-JPY's upside was capped by exporter offers and EUR-JPY was weighed by broader EUR losses.

[EUR, USD]
EUR-USD dropped after LTRO missed expectations. Banks will repay EUR 61.1 bln from the second year tender and will repay EUR 1.74 bln from the first tender. Both numbers were lower than expected. The medium for the second tender was around EUR 120 bln, though we did cite the risk that the Italian election could have comprised the outcome. EUR ticked up to 1.3225 ahead of the release as Italy retail sales firmed up 0.2% month-month, but on a year-on-year basis it fell 2.2%, which was the biggest fall in at least 18-years. When taken together with the EU growth forecast for 2013, which was cut to -0.3% for the region from +0.1%, previously, this was seen as a selling opportunity. The eurozone is expected to return to growth in 2014. Yesterday's bids at 1.3160 reportedly from Asian central banks are coming under pressure and stops through 1.3150 are a near-term risk.

[USD, JPY]
USD-JPY firmed up from the European open. Buying interest went through from the 93.15 region and it was then boosted from 93.25 up to 93.45 on spec fund demand for EUR-JPY. The cross firmed up from 123.10 and cleared the overnight high just ahead of 123.50. JPY shorts are optimistic over the potential BoJ Governor candidate after Finance Minister Aso said that the role does not have to go to an ex-MoF official, which the press believes gives Iwata an opportunity. Iwata backs foreign bond buying as a policy option and his appointment would also be consistent with the government policy stance. USD-JPY movement from here is likely to be more limited on the topside due to exporter offers that increase in size from 93.50 to 94.00. Outstanding option barriers from 94.50 to 95.00 are also supplying the market will dollars due to long gamma positions higher up.

[GBP, USD]
Cable corrected an overnight rally to 1.5320 and headed back into the 1.5250 region, leaving it largely unchanged from yesterday's N.Y. closing levels. Currently, good dip buying into is noted into this region and towards 1.5200 after a prominent U.K. name recommended a medium-term long position at this level on Thursday based on risk reward and oversold technical studies. Since Cable reached trend lows under 1.5150 it has experienced some very good buying by funds and long term hedging. Both oil and insurers have been tipped by our sources. The BoE/PBoC swap line agreement should not impact spot directly, but it is a major boost for London as a financial center at a time when it is badly needed.

[USD, CHF]
EUR-CHF firmed up after good bids at 1.2270 put a floor in place and real money bought EUR-USD. The cross has been sensitive to EUR price action and more prominent EUR demand since the European open has helped EUR-CHF to stabilise after the recent correction from just over 1.2350. USD-CHF is still hugging the 0.9300 area after it took off this week on risk aversion and the FOMC minutes, but it is also in territory where natural supply is now beginning to work against the topside. Intra-day traders will look to EUR for directional guidance as SNB have maintained policy status quo for the foreseeable future in comments made over the last week or so. The Swiss economy has shown signs of improvement, but deflationary headwinds are still evident.

[USD, CAD]
USD-CAD consolidates after it was unable to sustain movement over 1.0200 on Thursday. After edging over this level it headed back to 1.0160 after good selling went through. However, the underlying trend, recent weak commodity backdrop and soft equity markets should keep the upside in focus and 1.0231 is a target from levels last seen on July 25 of last year. Stops are seen at 1.0205-10, though more selling interest was touted from 1.0220-30.More stops can be expected over the level.