With markets focused on the expected Fed moves later today, there has been virtually no movement in forex rates overnight. The London market is also waiting for the U.K. Budget Statement due around noon U.S. time.

As yesterday, traders have shown little interest in buying dollars and trading lacks any overall direction. Key technical levels have not been broken.

The Tokyo market returned after a holiday but did little to boost dollar/yen. The dollar has traded in a narrow range and opening around 106.80 after closing in New York yesterday around 106.50.

The euro is now trading around $0.9705, with little movement in the past 48 hours. Already there is talk of a further euro zone rate rise in the near future as commentators see an improved growth rate in the coming year.

Euro/yen has maintained better levels and trades steadily at 103.60, marginally above last night's New York closing of 103.40.

Sterling is also stable at $1.5700. The pound is now looking at important technical levels and today's announcements in both the U.K. and U.S. could have important implications for the next move in sterling. The euro/sterling cross has softened to around 62 pence and would be vulnerable to any euro gains.

So far, expectations that today's budget statement might offer support for the pound through the anti-inflation focus of

Chancellor Gordon Brown

has not been borne out.

ABN Amro's

U.K. treasury/fixed-income analyst, Paivi Sonninen said he expects the same rate rise in the U.S. as most other observers and, "from the U.K. budget, we expect tax-cut and spending measures of GBP 5 billion, but for the overall budget stance of policy to remain tight."

Other U.K. analysts expect a smaller stimulus of GBP 2 billion to 3 billion. The Labor Government is expected to maintain conservative economic policies but is also aware that a general election must be held in the next year or so.

Chancellor Brown must also deal with a somewhat contradictory situation in that the country is running a large budget surplus but is seeing individual tax burdens rise. The return to the headlines of problems in the U.K. auto industry with BMW announcing its wish to dispose of Rover and related industrial relations issues is somewhat ominous given the tortured history of this sector.

The Australian, New Zealand and Canadian dollars remain soft. The common factor is the threat of an impending rate increase in the U.S. The Aussie is now a little higher at $0.6080 after seeing lows of $0.6033 in Sydney yesterday. Similarly the NZ dollar is modestly firmer in New York around $0.4875.

The U.S. dollar touched C$1.4765 on Friday and is currently trading around C$1.4715. These currencies are highly interest sensitive and much affected by the likelihood Fed tightening today. Forex traders continue to expect a 25-basis-point increase in U.S. rates and anything else will surprise the market.

Traders expect little action prior to the Fed announcement and the basic structure of forex rates remains as outlined in these reports over the past few days. The dollar and the euro have slightly more encouraging outlooks than a week ago but there is still a broad resistance to holding longer term positions.

The announcement of the U.S. trade deficit for January at $28 billion (December: $24.6 billion) was somewhat larger-than-expected but should have little impact on the dollar.

The ECB action in pushing euro zone interest rates to 3.5% last week and (if it happens) a rate hike in the U.S., should provide a base for recovery of the dollar and may make the Bank of Japan's task of managing the yen's rise considerably easier. First of all, though, technical levels will need to be held to give traders some confidence that long term down trends are losing steam.