There were heavy flows in Asia and Europe. EUR strength and JPY weakness set the tone in Asia after specs pushed through barriers in EUR-USD, EUR-JPY and USD-JPY after another set of weak Japanese data releases. China PMI data included a two-year high for the HSBC flash reading. The official release dipped, but the new orders index advanced, which was good enough for specs. In Europe, eurozone PMI was revised up and the German headline jumped, leaving it just shy of 50.00, which emboldened EUR longs. The ECB's LTRO repayment announcement was a bit lower than expected at EUR 3.48 bln, but this did not deter EUR bulls. Other good movers included very heavy GBP sell-interest related to a big buy order in EUR-GBP and a contraction in U.K. PMI, but it still remains in expansionary territory. AUD finally broke through corporate support after very heavy macro fund demand in EUR-AUD.

[EUR, USD]
EUR-USD jumped to new trend highs after an unexpected rise in eurozone manufacturing PMI, while the German reading came in much better than expected. EUR-USD rallied out of 1.3615 and cleared option barriers at 1.3650 and touched 1.3575. The rally came on heavy flows, with macro funds, leverage accounts and short term players that keyed off a very bullish daily chart. EUR did see a small pullback after ECB said banks will repay EUR 3.48 bln from the three-year LTRO on February 6. Adding to the easier tone was an earlier U.S. bank research note, which said that further rapid EUR appreciation could increase the chances of a ECB rate cut in the near-term. Other bank research pieces have said that EUR could target a move over 1.3700, but an extended run on 1.4000 is widely seen as a push too far for European policy makers and jawboning is expected to pick up.

[USD, JPY]
JPY fell sharply after Thursday's big expiries between 90.00 and 91.50 provided the potential for extended losses. USD-JPY was on the rise from the Asian open, with offshore and domestic funds lifting the pair from the 91.50 region and it extended through 91.80 up to 92.30 by late Asia. Ranges narrowed in Europe, but it maintained a bid tone close to 92.00 throughout. EUR-JPY was on the front foot from the open after it closed above 124.00 on Thursday and made steady progress until 125.00 gave way, which fueled a surge up to 125.70. In Europe, a surge in EUR lifted the cross to 126.16 highs before profit taking set in to leave it close to 126.60-70.

[GBP, USD]
Cable lost overnight gains after a strong bid for EUR-GBP and weaker than expected U.K. manufacturing PMI. Cable ran into strong offers from 1.5880 in early trade and eased after EUR-GBP moved up to the 0.8650 region on broad EUR strength and fixing demand. Cable moved into 1.5810, though there were still reports that good demand could go through over the next few days related to a large dividend payment. EUR-GBP was influenced by contrasting data releases since the European open, but there were also central bank bids related to an EU payment, according to sources. Both real money and central banks have been actively involved in the EUR-GBP rally in recent sessions. However, some long term corporates and assets managers have also picked up hedging activity as sterling represents good value at current levels.

[USD, CHF]
EUR-CHF had a choppy European morning, but overall it was unable to reclaim 1.2400, where offers emerged late on in the Asian session. European action this week, rather than supporting EUR-CHF, has actually weighed due to a pick up in swissy inflows. USD-CHF heaviness is a major source of pressure as corporate hedging and interest from private clients triggered a very bearish technical backdrop. It extended losses to 0.9040 today after barriers gave way at 0.9075 and 0.9050. EUR-CHF has chopped between 1.2365 and 1.2395 as a result. There was no impact from the surge in Swiss manufacturing PMI, but encouraging in the respect that since the start of the year the CHF has weakened and should benefit the sector further ahead.

[USD, CAD]
USD-CAD consolidated Thursday's losses under 1.0000 overnight. After reaching 0.9958 lows it backed up towards the 1.0000 region, where it remained ahead of the North American open. Dealers again noted decent bidding interest return into the lows from shorter term accounts, and reported another band of corporate buying from 0.9950. 1.0000-10 is likely to be a near-term resistance zone now as range players look to keep the pair offered.