The dollar was mixed in Europe. Weaker eurozone PMI data weighed on the EUR-USD tone, along with a warning from Russia that it could review its euro holdings after the way the Cyprus issue has been handled. Cable was boosted after a sharp rebound in U.K. retail sales after January data was impacted by a cold snap. JPY was a touch firmer since the European open as DPJ's Maehara said it could oppose Kuroda for his full five-year term. Interest was kept low though ahead of his first presser as BoJ Governor. EUR-CHF continued to trade in lockstep with EUR-USD, leaving it tied to levels around 1.2200. Meanwhile, in Asia local markets were boosted by a decent rebound in China flash manufacturing PMI, which was encouraging as it was the first reading that was not distorted by the Lunar New Year.

[EUR, USD]
EUR-USD moved under 1.2900 after softer eurozone PMI data. French and German readings both missed expectations, which fueled the pullback from 1.2930-40. Russia gave a warning on FX reserve holdings over the handling of the Cyprus crisis, which was also an early trigger for EUR bears. Russia has $537 bln in FX reserves, with 42% held in euros. Cyprus finance minister Sarris said it seeks a Russian loan extension by five years, with rates at 2.5% from 4.5% previously and confirmed earlier that discussions had included both gas and banking assets. There are natural EUR buyers anticipated around 1.2880 and the 1.2850 region, but without concrete news from Cyprus poor fundamentals may leave risk on recent lows around 1.2840. The November-22 low at 1.2835 will be a trigger for more selling if it gives way.

[USD, JPY]
USD-JPY eased a little in Europe after it failed to reclaim the 96.00, and after DJP's Maehara said it could oppose Kuroda's full five-year term. However, after moving back into 95.20 it headed back over 95.50 on long positioning in Kuroda's first presser as BoJ Governor. He said it must expand monetary stimulus both in terms of volume and the types of assets it buys. His deputy Iwata also said with interest rates near zero there is no choice but to adopt QE. So far, the rhetoric is as-expected and follow through USD-JPY demand is still limited under 96.00.

[GBP, USD]
Cable jumped to sessions highs just over 1.5200 after a sharp rebound in U.K. retail sales, which came in at 2.1% m/m. U.K. public borrowing data also showed a marked improvement for February, though numbers may have been flattered due to the U.K Budget. Spending was slashed in government departments into the Budget, according to commentators yesterday, while the ONS said the coffers were boosted by windfalls on the sale of superfast mobile broadband and also profits from BoE's bond buying program. After Cable tripped stops on the way up from 1.5150 sellers have entered the market, with highs from late February around 1.5220-25 fueling good order flows. However, the balance of risk will remain with the topside as the numbers will reduce QE expectations, especially after MPC members flagged concern over recent sterling weakness.

[USD, CHF]
EUR-CHF is trading close to 1.2200 after it traded in lockstep with EUR-USD amid rising expectations that Cyprus will come up with another plan in order to get a bailout. It has to find EUR 5.8 bln, but could not pass the bank deposit tax and is currently in talks with Russia to provide aid. The majority of the funds deposited at Cyprus banks is believed to be from Russian investors. EUR-CHF should see limited upside until there is more certainty over Cyprus and sellers are expected to cap into 1.2230 and 1.2250.

[USD, CAD]
USD-CAD drifted lower over the course of the European session. EUR-USD's ability to find support under 1.2900 seemed to encourage the commodity bloc currencies, which shrugged off weak eurozone manufacturing and focused on the rebound in China flash manufacturing PMI overnight and increasing expectations that Cyprus will find a solution to the current funding issue to get its eurozone bailout. USD-CAD edged back towards 1.0225 after moving mostly sideways overnight around 1.0250-60 overnight. Range players should buy into the 1.0220 and 1.0200 region, but stops could come into play under 1.0200 on positive eurozone news. Should 1.0200 hold it is likely that USD-CAD will drift back towards the 1.0250 region.