The yen and the U.S. dollar were broadly unchanged versus the other majors this morning, with the exception of the Aussie, which notched gains on better-than-expected Australian consumer inflation news. Investors appear cautious ahead of the US Federal Reserve policy announcement this evening.

The US FED began a two-day meeting on Tuesday, which is not expected to produce any surprises. What is interesting about the meeting is more the fact that it is taking place in the middle of a nasty Senate debate over whether the FED Chairman, Ben Bernanke, will be reconfirmed for another term. Bernanke's current term expires on Sunday. US President Barack Obama is also scheduled to deliver his State of the Union address, and a number of key U.S. companies are due to unveil earnings for the fourth quarter later today.

Last week, Obama's announcement about a bank overhaul spooked the US equity markets. Adding to the negative global economic sentiment was China's decision to boost bank reserve requirements yesterday in an effort to avoid the build up of asset bubbles while trying to maintain strong economic growth.

The FOMC will probably reinforce its commitment to keep interest rates near zero for an extended peiod, which does not wet the market's appetite for riskier, higher yielding assets. Generally speaking, it seems that long positions in the US Dollar and Yen make the most sense at this particular point in time.

Coming Up Today

11:00 GMT: UK CBI Realized Sales January
15:00 GMT: US New Home Sales December
19:15 GMT: US FED Interest Rate Decision and FOMC Monetary Policy Statement
20:00 GMT: New Zealand Cenral Bank Interest Rate Decision and Monetary Policy Statement