The USD maintained easier levels as risk appetite held up after good China manufacturing PMI data. However, JPY shorts were pared back after last week's IMM data revealed the highest level of yen shorts since July 2007. European markets shrugged off Moody's downgrade of ESM and EFSF as this was widely expected after the recent rating action against France. The German government spokesman Seibert was forced to clarify Merkel's position on Greece after she said debt write offs were possible in the future "if everything goes according to plan". Elsewhere, there was Fed speak since Friday's N.Y. close from Evans, Kocherlakota and Stein, which backed QE and the current policy stance. However, Philly Fed's Plosser was not convinced that QE was effective. U.S. ISM is the headline data release today, but fiscal cliff negotiations will dominate proceedings. In Canada, more range bound action looks likely ahead of the BoC rate announcement on Tuesday.

[EUR, USD]
EUR-USD traded tight ranges since the European open. After surging from 1.2980 to 1.3047 in Asia it has been held to a 1.3020-1.3048 range. Option barriers at 1.3050, 1.3075 and 1.3100 have encouraged profit taking, but the downside is limited after last week's bullish break higher and marked improvement in eurozone bond markets. Eurozone manufacturing PMI came in at 46.2 as expected and did not impact as most participants eye today's eurozone finance ministers meeting. Greece, Spain and Cyprus will be on the agenda. Market participants have taken an optimistic view of developments in the eurozone over the last week, but a poor growth outlook remains a challenge to austerity and debt sustainability.

[USD, JPY]
USD-JPY is weighed by overstretched speculative positioning, which fueled the move from 82.30 down to 82.10 after the European open. The BoJ policy outlook should still encourage yen sellers on upticks and USD-JPY demand is likely from 82.00 down to recent lows at 81.70, but a break out on the topside may be difficult given market positioning, as well as large outstanding 83.00 barriers. CFTC data revealed that IMM speculative yen shorts hit five year highs last week, while option expiry congestion added to supply amid strikes at 82.00, 82.10 and 82.25 today.

[GBP, USD]
Cable hit session highs just over 1.6055 after U.K. PMI hit 49.1, which was better than expected. The BoE revealed that net lending via the FLS in Q3 2013 was 0.5 bln and total drawdowns reached GBP 4.4 bln. It may be too early to fully judge whether the scheme will be a success, though details are a bit disappointing. BoE's Fisher said it is too early to use data as a reliable indicator, but signs are that it will help credit supply amid a widespread fall in funding costs. Cable was on the front foot ahead of the release amid U.K. clearer demand related to a dividend payment, along with the supportive risk backdrop. However, large standing offers from 1.6060-80 and 1.6100 barriers limit momentum. EUR-GBP's firmer tone around 0.8125 also provides a potential headwind for Cable, though the underlying trend points to higher levels.

[USD, CHF]
EUR-CHF edged over 1.2060 after some swissy longs cut positions after EUR surged in Asia. Ranges have been tight since the European open as the market digests plans by the Greek debt agency to buy back debt by a Dutch style auction. Greek bonds have advanced, but movement across FX and stocks is contained. Swiss data included a 2.7% rise in retail sales, which compared with 5.4% previously and was a bit weaker than expected. PMI data beat expectations and improved to 48.5 in November from 46.1 in October. EUR-CHF looks limited under 1.2065-70 offers, while USD-CHF is stable around 0.9250, but may see some upside after no progress was made under the 0.9250 trendline after last week's break lower. Offers are tipped into 0.9280-00.

[USD, CAD]
USD-CAD is still range bound after it was unable to sustain higher levels on Friday. It jerked higher after the softer Canadian GDP data, but peaked over 0.9950. The pairing continued to trade a narrow range, inside last week's 0.9905 to 0.9960 band all week, as opposing forces keep the CAD hemmed in. Option and fund offers have been at the top of the range, while corporate buyers have kept the 0.98 handle from view. We expect the target overnight rate to remain at 1.00% when the BoC meets on Tuesday, and for the maintenance of the October language regarding eventual withdrawal of stimulus. Despite the one-two punch of a tepid 0.6% Q3 GDP gain and flat September GDP figure, the underlying growth dynamics are not far removed from what the BoC anticipated in October.