The dollar held steady overall, with risk appetite still comprised by the weaker data out of the eurozone and the weekend Italian election. EUR traded a tight range close to 1.3200, though was supported by EUR-JPY demand. USD-JPY was underpinned on movement into 93.00 and below amid optimism that the candidate for BoJ Governor will be dovish. The press have suggested that Iwata could still be an option after Finance Minister Aso said the next governor does not have to be ex-MoF. Iwata is a known dove and favours foreign bond buying as a policy option. AUD posted a very strong rally back over 1.0300 after RBA Governor Stevens made upbeat comments on the domestic economy and China. Notably, Stevens said that there is already a good deal of stimulus in the pipeline and that rates are lower than they would have been because of the stubbornly high AUD. Elsewhere, Cable moved briefly over 1.5300 on short covering, which saw another round of trailing stops taken out.

[EUR, USD]
EUR-USD started the session under 1.3200 after hitting trend lows of 1.3160 during Thursday's N.Y. afternoon. Since the FOMC minutes the flight into the dollar has been reinforced by safe haven trading amid poor eurozone data and pending event risk. Today's LTRO repayment announcement for the second three-year tender may be lower than expected because Italian banks could hold on to funds ahead of the weekend election. Interestingly, the ECB released details of its SMP holdings on Thursday and it holds EUR 99 bln in Italian bonds, which is perhaps a reminder to Italy of the importance of choosing the right policy path. EUR is likely to meet selling pressure on upticks today given these background risks.

[USD, JPY]
USD-JPY is more broadly balanced close to the 93.00, but continues to meet buying interest on dips on BoJ policy expectations. The market expects the next BoJ Governor to be an appointment that is consistent with the government stance on Japanese policy. PM Abe and Finance Minister Aso have reportedly been in conflict on the issue, but the press suggest that Iwata could be a suitable candidate after Aso said the role does not have to go to an ex-MOF official. Iwata backs foreign bond buying, which would be very unpopular with global policy makers, but a policy that Abe has been open to trying. However, since the G20 both Abe and Aso have been lukewarm on the idea. However, the market would take an appointment like this as yen negative.

[GBP, USD]
Cable took off from the 1.5260 area and hit 1.5320 after a buy order went through in thin trade out of Tokyo. Weak trailing stops were filled on the way through 1.5300-10 as shorts were forced to cover positions. 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 as current levels represent good risk reward. Indeed, a leading U.K. name tipped a medium term buy signal yesterday. 1.5200 represents the bottom of the range over the last two years and Cable also has strong exhaustion signals on the daily chart.

[USD, CHF]
EUR-CHF was weighed by eurozone risks and traded at 1.2270 during Thursday's N.Y. afternoon. EUR-CHF was impacted by broader EUR weakness, which overwhelmed the bid in USD-CHF despite the move over 0.9300. The cross outlook will be wholey dependent on the eurozone, which will determine SNB policy ahead. The SNB has maintained in the last two weeks that the peg is here to stay for the foreseeable future while eurozone uncertainty and deflationary forces are at play. Intra-day, EUR-CHF buyers are likely between 1.2270 and 1.2250, while movement into 1.2330 and 1.2350 should see natural selling pressure.

[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.