• German Current Account
• German Trade Balance
• BOJ Monetary Policy Report
• Bank of England Rate Decision

German Current Account (July) (7:00GMT, 2:00EDT)
Consensus: 8.3B
Previous: 10.4B

German Trade Balance (July) (7:00GMT, 2:00EDT)
Consensus: 14.7B
Previous: 16.8B

Outlook: Expected to retrace slightly from gains made last month, both the German currency account and trade balance figures look to dip slightly.  Consensus expectations are for a dip to 8.3 billion euros and 14.7 billion respectively.  Attributed to the notion looks to be a revitalization in imports as the figure is expected to rise 1.5 percent for the month, outpacing consensus expectations of a 1 percent gain by exporters.  With a slight turnaround in consumer confidence and a noticeable pickup in economic activity, consumers look to have returned to the foray, increasing their spending habits.  Additionally, with crude oil and energy prices on the rise, the weaker euro looks to have made commodity prices higher than previously valued, cutting into the surplus.  Subsequently, equity interest remains high as benchmark indexes remain at lofty highs on the year propping up the figure.

Previous:  Both rising in the month of June, Germany's trade balance surplus rose to an all time high of 16.8 billion euros, as a smaller dip in exports was more than offset by a decline in imports for the month of July.  Exports fell 5.5 percent in the month while imports incrementally dipped 0.4 percent.  Assisted by a depreciated domestic currency, European exporters benefited enormously as global demand picked up in the month.  However, in light of domestic demand remaining under water, consumers still spent disposable income on goods from abroad, in light of the decline.  As a result, the better than expected figure contributed to a higher current account as well, rising 10.4 billion in the same month.  Although helped along by an enormous dip in imports, the figure also was boosted by an increase in foreign interest for domestic securities.  With both European benchmark indexes higher on the year, Dax up 16 percent and CAC-40 higher by 16 percent year to date, foreign investment capital poured into Euro denominated assets boosting the capital component.
 
Bank of Japan Monetary Policy Monthly Report (06:00 GMT, 02:00 EDT)

Outlook:  The two-day meeting of Bank of Japan monetary policy officials is expected to yield no change from the previously held position of target reserves available to lenders between 30 and 35 trillion yen, while keeping the lending rate near zero.  As before, the key factors for a rate hike have still not been met.   The bank has promised to stay with its ultra-loose policy until core consumer prices stop falling for a few months and they are certain that deflation would not return any time soon.  They are also looking for economic growth to pick up to help sustain a rise out of the frequent recessions the economy has fallen under on and off for the past decade.  Consumer prices excluding volatile fresh food, fell 0.2 percent in July from the same period a year ago, keeping the serious discussion of a rate hike off of the table.  However, Bank of Japan Deputy Governor Toshiro Muto said in a statement on September 1st that the economy is in a self-sustaining recovery that could improve the economy sufficiently enough to bring a halt to deflation.  Further, comments from Governor Toshihiko Fukui suggest that core inflation could return by the end of this year or early 2006.  Particularly interesting to officials for the next policy meeting will be the outcome of Japan's general election.  Prime Minister Koizumi's list of policies is expected to provide fertile ground for economic growth.

Previous:  On August 9th, the Bank of Japan kept the same cash target of 30-35 trillion yen, and zero interest rate, that we've seen since the beginning of 2004. This was again done with a 7-2 majority vote as committee members Toshikatsu Fukuma and Atsushi Mizuno probably voted for a decline in the cash target to 27-32 trillion, which was first proposed in the April 6th meeting. Corporate profits and wages have been on the rise lately, which is spurring consumer spending again. The economy has also just achieved its third straight quarter of growth after two quarters of contraction last year. However, consumer price inflation has only been positive for four months out of the last seven years. The latest comments from BoJ Governor Fukui included the statement that core consumer prices would have to stop declining for a "few" months before the bank would be convinced that deflation was eradicated. Domestic corporate goods prices have been on the rise very since March of 2004 and this combined with increasing wages hints at a positive effect on consumer prices in the months ahead. However, this also means that a lower cash target probably wouldn't come around until at least 2006.

Bank of England Rate Decision (11:00 GMT, 07:00 EST)
Consensus: 4.50%
Previous: 4.50%

Outlook:  Bank of England officials are expected to have kept the countries benchmark lending rate unchanged at 4.50 percent after having cut the rate for the first change in over two years.  Many of the factors that were considered with the previous rate decision to loosen the repo-rate persist in Europe's second largest economy, but there is reason to believe short-term inflation could jump in the near future.  Consumer spending, which drove 52 quarters of consecutive growth, remains soft as energy bills continue to lighten citizen's pockets and public debt continues to hover near record highs.  Bank estimates for economic growth have also been reduced significantly to 2.0 percent in 2005, from a 2.5 percent forecast in May.  Although these indicators would call for a rate reduction sometime in the near future, many economists believe that another cut will not follow until later in the year.  Recent figures have favored inflation and growth numbers that are consistent with expectations for the bank holding rates stable at this meeting.  Inflation peaked to an eight-year high 2.3 percent in July as the price of crude breached $60 bbl, and energy prices have continued to rise from there.  The bank has also revised second quarter growth to 0.5 percent from 0.4 percent.  With this mixed bag of data, the previously split 9-member board, has room to maneuver.

Previous:  At their August 4th meeting, the Bank of England decided to reduce the overnight lending rate by 25 basis points to 4.5 percent, the first cut in over two years. The controversial 5-4 split in the vote left Governor Mervyn King in the minority, the first occasion for this unique situation since the bank gained independence in 1997.  The decision is particularly telling of how the voters believe economic growth and inflation will respond to crude prices moving beyond $60 bbl.  Growth in the second quarter fell to its lowest annual pace in twelve years for the $2 trillion economy on pared consumer demand, which accounts for two-thirds of GDP.  Consumer spending has suffered among a weakening labor market, record levels of public debt and historically high interest rates.  Growth numbers were not pleasing, but expectations of subdued inflation further persuaded officials to vote for the cut.  Inflation which could be coaxed higher by rising oil prices, was expected to feel more pressure from falling consumer spending; and drop back below the bank's 2.0 percent target level.

Richard Lee is a Currency Strategist at FXCM.