The risk backdrop is mixed in early Europe. The China flash manufacturing PMI move to two year highs remains a positive for the global recovery story, but a poor Japan trade number, weak S.Korea GDP and worse than expected Apple earnings highlighted the challenges for the global economy. Adding to that mix is geopolitical risk after North Korea plans more rocket launches and nuclear tests, which it claims are "aimed" at the U.S. The conventional wisdom would argue for a flight to safety bid, which should support the USD and CHF dip, but early Europeans have keyed off JPY movement after it registered the biggest footprint overnight. More Japanese policy rhetoric combined with weak data, while the yen can also be traded as proxy for the North Korea story, leaving USD-JPY elevated around 89.30 after it jumped from 88.50 to 89.45 overnight. In Europe, manufacturing PMIs are in focus, along with the U.K. CBI retail sales survey.

[EUR, USD]
EUR-USD is a disappointment again, with no impetus to break the recent range. It spent another session close to 1.3300 in Asia. An early move out of risky positions weighed, but short term funds and range types have bought the move into 1.3300 and below and more bids are lined up into 1.3270 and 1.3250. Unless 1.3250 breaks it will maintain the current range trading theme. Sellers are lined up into 1.3350 and above.

[USD, JPY]
USD-JPY is underpinned after it rallied out of 88.40 in Asia and tripped stops over 89.00 and 89.30 to force 89.45 highs. After real money and Japanese importers put a floor in place yesterday there was more leverage fund activity today. A Nikkei recovery was supportive for speculative positioning, while North Korea's warning to the U.S. also weighed on yen as a proxy for the region. With intra-day accounts positioning for yen weakness comments from Nishimura gave JPY the traction to trigger stops and USD-JPY streamed higher. The JPY crosses had a decent session as well, with trust banks and securities houses most active in EUR-JPY and AUD-JPY, though flows also went through GBP-JPY and NZD-JPY.

[GBP, USD]
Cable remains heavy under 1.5850, but so far there has been no impetus to retest 1.5800 barriers after shorts met good Middle Eastern demand on Wednesday. However, the subsequent recovery to 1.5890 gave position traders an opportunity to establish short while the 200-dma holds around 1.5900-10. Economic fundamentals remain weak, but yesterday's saw an unexpected drop in U.K. labour market data, while the BoE minutes also suggest that saw members believe recent data could result in no further QE. In recent sessions many commentators have warned over potential sterling weakness due to poor economic fundamentals. 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 is underpinned after it saw a round of bargain hunting on Wednesday after the brief move under 1.2350. The Swiss and German flows carried it back over 1.2400, but it has had a hard time sustaining higher levels since it corrected from the 1.2570 area late last week. The cross is still correcting overbought levels and there are still mixed macro leads globally, which could explain the pause, though long term players are still positioned for a move back over 1.2500 towards 1.2600 and above. 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 is well bid around 1.0000 after it spiked higher on Wednesday following the BoC announcement, where rates were left unchanged, as expected. The statement though marked a shift. It said "modest" stimulus removal would likely be required over time, but the timing is "less imminent". Dip buying is now likely, with orders placed at 0.9970 and 0.9950 on small setbacks. Longs look for an extended run through the 21-dma at 1.0030-35.