There was a lot to digest overnight amid an after-hours earnings miss from Apple, a strong manufacturing PMI from China and very poor Japan trade data. North Korea also raised geopolitical risk after it planned a serious of rocket launches and nuclear tests, which it said are "aimed" at the U.S. This kept the USD supported to a degree, though JPY fell on more heavy policy rhetoric to counter yen strength, along with proxy trading on North Korea. In Europe, a very weak French PMI reading was offset by a much stronger German headline, which saw a better eurozone outturn and supported the EUR on dips. Cable remained heavy despite a better than expected U.K. CBI reading. AUD-USD traded heavily after limited upside in Asia, while NZD dipped after chemical traces were found in milk, which could make regulators and consumer reject NZD exports.

[EUR, USD]
EUR-USD found buyers under 1.3300 after a better than expected German manufacturing PMI reading offset a very disappointing French PMI release. EUR headed back towards 1.3345, where offers capped just after the European open. Adding to the supportive backdrop is talk of Asian sovereign demand for EUR-JPY, which lifted the cross to 119.60 area versus overnight lows of 117.50. EUR-USD is likely to remain range bound ahead of ECB's LTRO repayment announcement tomorrow. There are expectations anywhere between EUR 100 bln to EUR 200 bln for tomorrow. A large repayment could lift rates and may support the EUR. In the options space this seems to be the most widely hedged, with good demand for strikes from 1.3350 to 1.3450 for Friday to Tuesday expiries. Hence, a lower number may see the larger moves. Note, 1.3250 is still the major level on the downside.

[USD, JPY]
USD-JPY extended the overnight rally through 89.50 amid a good EUR-JPY bid from Asian soveriegns. EUR-JPY rallied out of 117.50 to 118.50 in Asia and has added another full big figure towards 119.60 after encouraging German manufacturing PMI data. There were mixed leads overnight. A strong China flash manufacturing PMI release was offset by poor Japan trade data, weak S.Korea GDP, an earnings miss from Apple and a rise in geopolitical risk. After the recent shakeout by yen shorts there has been resurgence in both domestic and offshore flows, leaving USD-JPY risk on a move back over 90.00. Option barriers feature heavily from the 90.50 area though and could slow the rise.

[GBP, USD]
Cable remained heavy under 1.5850. So far there has been no strong impetus to retest 1.5800 barriers. U.K. CBI distributive trades came in at 17 from 19 previously, which was better than market expectations. Cable looks weak technically, but shorts got caught by a Middle Eastern name in front of 1.5800 yesterday and this has deterred heavier selling today. Range players still sell ahead of the 200-dma around 1.5900-10 and look to unlock levels from late August around 1.5770-80.

[USD, CHF]
EUR-CHF is underpinned by long position building, which follows Wednesday's round of bargain hunting after the brief move under 1.2350. It has experienced more local name demand today from the 1.2370 area, while a better than expected German manufacturing PMI reading has carried EUR higher. EUR-CHF has had a hard time sustaining higher levels since it pulled back from the 1.2570 area. The cross is still correcting overbought levels and there are still mixed macro lead 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-CHF is supported on dips into 0.9300 and below within the narrow 0.9280-0.9350 trading band.

[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.