• Australian Gross Domestic Product
• German Industrial Production
• Bank of Canada Rate Decision

Australian Gross Domestic Product (Q2) (00:30GMT, 21:30 EDT)
Consensus: 0.9% (QoQ); 2.1% (YoY)
Previous:    0.7% (QoQ); 1.9% (YoY)

Outlook: The Australian measure of economic growth is expected to rise to at a rate of just under 1 percent. This growth is fueled by a number of factors. Oil shortages have led to a demand for alternative sources of energy, which are primarily coal and iron ore, two of Australia's main exports. Recently, the Australian current account deficit was reduced to A$12.6B, beating estimates of A$13.6B. This adds to the net export component of GDP, but also had some spillover effect in business investment. Private capital expenditure rose 7.3 percent, surpassing the 3.5 percent consensus. Australian economy has also been assisted by above-average returns in the gold and copper market. The net effect of the housing industry was also probably positive during the 2nd quarter. Although prices of Australian homes fell a tenth of a percent, this slump was only felt in residential real estate, as there was a 10.8 percent increase in non-residential building construction. This economic pickup probably will not cause the central bank to increase rates as Australian inflation is still within the bank's target range of 2 percent to 3 percent.

Previous: After the central bank raised the interest rate to 5.5 percent on March 2, companies cut spending by 2.6 percent. This along with a drought which affected half of the nation's farmland, slashing output, caused Australia first quarter GDP to grow at a slower than expected rate, reaching 0.7 percent, lower than the 0.9 percent consensus. The drought greatly reduced exports since Australia is the world's second largest wheat exporter and third in cotton exports. The main measure of Australian economic growth failed to meet expectations due in part to retail sales in April having the largest drop in nine months and manufacturing reaching a three year low. Business confidence fell in the first quarter as companies said they had fewer orders. Australia's economy grew 1.9 percent in a year, which is less than the 3.7 percent growth in the U.S. and the 2.7 percent increase in the U.K. in the same period.

German Industrial Production (MoM) (JUL P) (10:00 GMT, 6:00AM EDT)
Consensus: -0.4%
Previous:  1.6%

Outlook: After last month's surge of 1.6 percent in industrial production, economists are expecting a slight pullback this month. Judging from other previously released indicators, this number is possible although there is some upside risk. Both the manufacturing PMI and Ifo business confidence indicators increased in July. Particularly, the output component of the PMI increased to 52.6 from 50.9, signaling faster growth. Meanwhile, the Ifo's manufacturing business climate index had a sizeable climb of 5.2 points to -0.1 from -5.3. The strongest support for a higher figure would probably be July's factory orders growth figure of 3.7 percent versus the expected 0.9 percent contraction. Manufacturing orders have just experienced uninterrupted growth totaling 8.5 percent (in the three months up to July), a feat not achieved in five years. Since orders typically lead production, this indicates that output should've produced fairly positive results in July and may continue to do so for the next report.

Previous: Germany's industrial production in June beat expectations by soaring a revised 1.6 percent after shrinking 0.4 percent. Economists were originally predicting a much smaller 0.3 percent gain. The good news can mostly be accredited to the drop in the euro, whose value against the dollar fell nearly 10.5 percent in the first five months of this year. This made German goods more competitive abroad which later raised profits of German exporting companies. These profits translated to a boost in business investment which spurred domestic demand for capital goods. Production of capital goods grew 3.9 percent in June alone and almost 7.4 percent in the first 6 months of this year. Consumer demand for durable goods also picked up by 8.3 percent in June as the unemployment rate moved from 11.6 percent to 11.3 percent. What's even better is that this sort of domino effect seems sustainable in the near-term as factory orders continue growing, which will fuel production in the months to come.

Bank of Canada Rate Decision (September 7) (13:00 GMT, 9:00AM EDT)
Consensus: 2.75%
Previous: 2.50%

Outlook: Economists are expecting the Bank of Canada to announce a 25 basis point increase in the benchmark rate tomorrow. This was basically a known fact since the press releases following July's monetary policy meeting, which came just short of completely announcing the upcoming rate hike. The reasoning behind this move is also clearly due to recent capacity constraint issues. After some revisions to previous calculations, the BoC published in July that the economy was operating at capacity in the first quarter and only "a slight amount of economic slack" should've formed in the second quarter. Although wage growth hasn't become problematic yet and inflation has remained below 2 percent, the capacity issues driven by global demand are enough to justify this move. Going forward, there will probably be more increases to the interest rate, but some economists are now projecting that the BoC will take a pause after a hike in October to give the economy time to recover from the recent Katrina-induced gasoline price shocks.

Previous: In their last meeting, the monetary authorities at the Bank of Canada held the interest rate at 2.5 percent despite accumulating support for a rate hike. The economy has been operating very close to its full production capacity. The unemployment rate reached 6.7 percent in June, a level seen in only four months out of the past 30 years. In addition to this, there was strong growth seen in full-time employment. This combined with falling mortgage rates has been feeding into more consumer spending for a country that was already operating at 86.4 percent of industrial capacity in the first quarter. The press release accompanying this meeting left little doubt that a rate hike is coming with a published statement saying that "some reduction in the amount of monetary stimulus will be required in the near term," which many interpret to be as soon as the next meeting.

Richard Lee is a Currency Strategist at FXCM.