Appetite to buy the USD picked up rapidly overnight after the FOMC minutes, which were more hawkish sounding than the market had expected. Two large U.S. names were aggressive dollar buyers against a variety of currencies, which drove EUR into 1.3000 in the European morning. USD-JPY maintained its default bid on contrasting policy expectations and it extinguished another round of option barriers at 88.00, which lifted one-month implied volatility by 0.6% from 8.6% to 9.2%. In Europe, economic data did not have a great deal of impact ahead of the NFP release. Eurozone services sector PMIs were mired in contractionary territory, with the exception of Germany. The readings did suggest that the pace of the downturn has bottomed out though, which is encouraging. U.K. services PMI was awful and plunged to two year lows at 49.4, which forced Cable towards the 1.6000 region.

[EUR, USD]
EUR-USD ran into buyers into 1.3000, where options support was tipped, but these gave way ahead of the N.Y. open. A large U.S. name was noted on the bid, along with European corporate orders. There was evidence of profit taking by short term specs, which fueled a move back over 1.3025, but the underlying tone kept the topside is check due to an overhang of good sell-interest. Real money and macro funds were heavy dollar buyers overnight after the FOMC minutes were more hawkish sounding that had been expected. Buyers are noted ahead of more sell stops through 1.2980.

[USD, JPY]
USD-JPY traded at new trend highs over 88.30 after an Asian central bank extinguished 88.00 barriers and follow through yen selling by specs. Japanese sellers emerged over 88.30, which forced a small move back towards 80.15, but the underlying tone is firmly skewed to higher levels despite very excessive yen short positions. EUR-JPY traded out of 114.30 in early Europe and reached 114.95 and AUD-JPY flushed out barriers at 92.00 to trade at trend highs just shy of 92.20, leaving it around 70 pips higher since late Asia. The FOMC minutes reinforced the USD-JPY uptrend, while Japan's chief cabinet secretary Suga indicated that the next BoJ governor will be be someone that is familiar with Abe's thinking, which underlined policy easing expectations. USD-JPY longs tip good resistance at 88.50, where another batch of barriers are noted.

[GBP, USD]
Cable tripped stops at 1.6050 after U.K. services sector PMI plunged to two-year lows of 49.4 from 49.6 previously, which underpinned triple dip recession risk. Range players are expected to buy back sterling shorts ahead of the psychological 1.6000 region and both corporate hedging and reserve management flows are likely to be prevalent on dips. The technical backdrop has shifted dramatically since Wednesday, with the downturn and series of negative closes pointing to much weaker levels. The caveat is of course lower than average volumes and disjointed cross-market moves that is often a feature of New Year trading. In the government bond market U.K. yields have moved above France for the first time since April 2011 amid rising expectations that the U.K. will lose its AAA rating.

[USD, CHF]
USD-CHF extended gains to trade at 0.9300, which are its best levels since December-12. It firmed up from 0.9265 at the European open, but momentum dropped off after option defensive bids put a floor in EUR-USD ahead of 1.3000. Asian reserve management flows were patchy. There was evidence of supply on top of USD-CHF, but a AAA name was a seller of EUR-USD and a buyer of USD-JPY. The underlying tone for USD-CHF indicates higher levels after yesterday's FOMC underpinned U.S. Treasury yields. However, the focus should shift back to more immediate data releases as NFP data is due in the N.Y. morning. Over 0.9300 there are a build up of offers from 0.9330 to 0.9350.

[USD, CAD]
USD-CAD triggered stops above 0.9900 after fund offers gave way as risk aversion steepened during the European morning. Yesterday's FOMC minutes, which were more hawkish sounding, added traction to the risk-off tone. Near-term buyers are noted from 0.9870-80 and corporate bids remain a feature on the downside from 0.9850 and should put a floor in place. The move back over 0.9900 offers potential for a run back towards 0.9940-50, but this will be dependent on risk and today's economic data releases.