Asian session: The yen weakened against all of its 16 major counterparts

00:00 China Bank holiday

00:30 Australia CPI, q/q IV quarter +0.6% +0.2% 0.0%

00:30 Australia CPI, y/y IV quarter +3.5% +3.3% +3.1%

02:00 U.S. President Obama Speaks

05:00 Japan BoJ monthly economic report

The yen weakened against all of its 16 major counterparts after Japan posted its first annual trade deficit in 31 years, stoking concern the country’s fiscal health may deteriorate. Japan’s exports dropped 8 percent in December from a year earlier, the Ministry of Finance said today.

Demand for the dollar  was limited before the Federal Reserve releases forecasts today for benchmark U.S. interest rates for the first time.

The Fed said last week it will offer two charts along with the forecasts for the benchmark rate. The first will use shaded bars to show in which year participants in the FOMC project the central bank will first raise rates. The second chart will show projections from each participant for the appropriate federal funds rate target at the end of the next three years and the longer run.

Policy makers left the target for overnight loans between banks in a range of zero to 0.25 percent last month and reiterated that economic conditions may warrant “exceptionally low” rates “at least” through mid-2013. They are forecast to keep the key rate unchanged today, according to a Bloomberg survey.

The Australian dollar rose more than a 0.4 of one US cent after the release of weaker-than-expected consumer price index data. At 8.30am, the Australian Bureau of Statistics announced that Australia's CPI was flat in the December quarter, for an annual rise of 3.1 per cent. Economists' forecasts for the CPI had centred on a rise of 0.2 per cent in the quarter, for an annual pace of 3.3 per cent.

EUR/USD: during the Asian session the pair was in a range $1.3015-$1.3045.

GBP/USD: during the Asian session the pair receded from yesterday's high.

USD/JPY: during the Asian session the pair rose having come nearer to level Y78.00.

On Wednesday UK data at 0930GMT includes the first estimate of Q4 GDP as well as BBA Lending data and the latest Index of Services, while at the same time the latest bank of England MPC meeting minutes are due along with the BoE Agents Report. Main European data stats at 0900GMT with the German IFO business survey. In Davos, Swiss Finance Minister Eveline Widmer-Schlumf is due to speak at 1600GMT, followed at 1630GMT by German chancellor Angela Merkel. US data starts at 1200GMT with the weekly MBA mortgage applications data. At 1500GMT, NAR pending home sales are due along with the FHFA Home Price Index and also BLS Mass Layoffs data. This is followed at 1530GMT by the weekly EIA crude oil stocks data. At 1730GMT, the US Federal Open Market Committee decision is due. Also, this time around, from 1900GMT, the Federal Reserve will publish the FOMC participants federal funds rate projections for the first time, which will be ccompanied by updated quarterly economic assumptions. After this, at 1915GMT, Federal Reserve Chairman Ben Bernanke holds a news conference to provide additional context for the FOMC's policy decision.