1. German ZEW Survey
2. Bank of Canada Rate Decision
3. US Net Foreign Security Purchases

German ZEW Survey (Econ Sentiment (OCT) (09:00 GMT; 05:00 EDT)
Previous: 38.6
Outlook: 42

Outlook:  Forecasts for the volatile ZEW survey show that investors' outlook on the economy likely improved for the month of October to 42.  The two major issues that have weighed on investors' minds over the previous measure's period persisted through October, but with a more certain and positive sentiment than last.  Oil prices that surged above $70 per barrel in the end of August and had drifted lower through September; have continued their depreciation in October, dropping near $60 per barrel.  Not only will businesses' balance sheet reflect the cheaper raw energy prices, consumers will likely be more willing to increase their demand and spending, improving sales.  Consumers have had to deal with high unemployment and gasoline prices that doubled in the past three years.  Improving the average consumer's outlook beyond lower energy prices, will be the jobless rate dropping to 11.7 percent from the high set five months ago.  Another point of improvement for the investors to consider comes with a clearing political picture.   The two parties, the Christian Democratic Union and the Christian Social Union, have since the election formed a grand coalition which places Angela Merkel at the head of the party.  The main body of investors will still hold a level of caution on this factor however.  While roles are more definite and a hierarchy has been defined, problems with passing policy will endure with a split house.

Previous:  Investor confidence in Europe's largest economy fell for the first time in four months to 38.6 in September.  Confidence fell beyond the expected 45 reading as oil prices continued to burden businesses and consumers and the election stalemate left the policy to improve the economy an unfulfilled issue.  Results from the September 18th general election left acting Chancellor Gerhard Schroeder in a near deadlock with Christian Democratic Union leader Angela Merkel.  The even results left a split house in which controversial policy would have a hard time being pushed through.  Hopes that Merkel would have a majority at the polls followed her economic-supportive policy of cutting labor costs, reducing taxes and reviving growth.  Labor costs in Germany are among the highest in the world and compounds the situation for the country whose jobless rate rose to a post-WWII record 12 percent in March.  Furthermore, growth has stagnated in the second quarter as businesses try to cope with rising energy prices. The cost that higher oil prices have added to German business have not only led to more expensive raw materials and input prices, but have also resulted in shoring domestic demand.  While these issues have dominated investors plate, after these issues are resolved there will be a more stable and positive economy waiting for scrutiny.  Recent data showed that retail sales climbed in August, unemployment declined and manufacturing orders improved.

Bank of Canada Rate Decision (13:00 GMT; 09:00 EDT)
Consensus:   3.00%
Previous:   2.75%

Outlook:  The Bank of Canada, headed by Governor Dodge is expected to respond to inflationary effects over the last couple of months with an increase to the benchmark lending rate to 3.00 percent, the second such hike in the past two months.  An increase to the lending rate comes amid debate about whether such monetary policy could hurt the vital export and manufacturing sectors.  Manufacturers have been hit by rising raw material prices and have been forced to lay off workers in an economy that paradoxically is running near full capacity.  They have also suffered with sales of their goods to foreign buyers.  With the Canadian dollar appreciating against most major currencies, Canadian goods have increasingly become more expensive.  The Canadian dollar gained more than 35 percent against the benchmark dollar over the past three years.  This increase has led to growth in exports dropping to less than half the pace of imports.  Specifically wood products, automobiles and machinery have been particularly hard hit.  More than offsetting the slowing demand for manufactured goods however has been oil.  Oil products have accounted for 85 percent of the countries trade surplus in August.  Both the trade balance and currency's dependency on oil prices could leave the Canadian dollar in a precarious situation where the economy is dictated by the volatile commodities' price. Despite the chance for further slowdowns in the exports, Dodge is expected to go ahead with the increase to deal with price growth that rose to 2.6 percent in August, above the bank's target 2 percent.  Dodge has said in a recent statement that, due to recent energy prices, inflation will accelerate to 3.0 percent in September, which would bring the measure to the upper band of the Bank's acceptable range.

Previous:  The Bank of Canada increased the main interest rate 25 basis points to 2.75 percent on September 7th.  This is the first increase in the overnight lending rate in since November and narrowed the gap shared with the United States which increased its rate to 3.5 percent over the period.  Accompanying the decision to raise rates was the statement that the current situation has "*the Canadian economy operation close to capacity and the stance of monetary policy still stimulative."   Monetary policy officials decided that inflation and growth are both secure enough in the coming months to sustain the more hawkish policy stance.  Canada's economy grew an annual 3.2 percent in the second quarter, above the 3 percent the bank says can be sustained without stoking inflation.  Possible issues the bank was contending with when making the decision were the after affects of Hurricane Katrina.   Following the fallout of the storm, oil prices spiked higher while possibly leaving a considerable dent in demand.

Net Foreign Security Purchases (TIC) (AUG) (13:00 GMT; 09:00 EDT)
Consensus: $60.0B
Previous: $87.4B

Outlook: Net purchases of securities from the world's largest economy are expected to have slowed for the first time in four months with the consensus set for a $60.0 billion increase from July.  Indications that international investors decreased their rate of purchases in U.S. assets come from both demand issues and less appealing investments.   Debt and equity instruments in the U.S. took a hit in the month of August, scaring potential investors of further declines.  The benchmark 10-year Treasury note saw yields drop to 4.01 while the Standard and Poor's 500 index fell 1.2 percent for the month of August.   Demand may increasingly become an issue as well.  As the globe continues to cope with increasing energy prices, private investors and governments have fewer funds to use for investment purposes.  However, the U.S. continues to be the leader in economic growth and attracts investment with its potential for expansion.  Growth in the third quarter is expected to have expanded 3.5 percent.  Furthermore, the Federal Open Market Committee's decision to increase the benchmark lending rate to 3.50 percent on August 9th will likely translate to improved demand for debt securities, especially from England, the third largest foreign holder of U.S. securities, after the central bank decided to cut the interest rate to 4.50 percent.  Also of note, following the currency exchange rate for the period could give an indication of the direction for investments.  The dollar actually depreciated against the three largest investors in U.S. assets; the euro, the British Pound and Japanese Yen in August.

Previous: Foreign investors ignored the burgeoning current account and budget deficits in July and increased their net holdings of U.S. assets.  International holdings rose by $87.4 billion in July compared to $80.9 billion in June.  This increase in holdings is the largest since January and is the fourth straight month the measure has risen, a trend not seen since 1985.  Foreign interest in U.S. assets has been piqued as the account deficit eased in the second quarter, capital markets improved and the U.S. still remains the safest place to invest funds.  Account deficits have plagued the U.S. for years and have grown quarter over quarter since 2003, that is until the second quarter of this year.  The current-account deficit contracted to $195.7 billion, falling from the largest gap in history but is still large.  A concurrent rise in equity and debt markets also drew buyers in.  Major stock indices rose over July, marked by a 3.6 percent increase in the Standard & Poor's 500 index.   Debt markets have been equally attractive especially treasuries with the main lending rate increased to 3.25 percent in the month.  Purchases of Treasuries led the increase in holdings, increasing a net $28.5 billion, while demand for U.S. corporate bonds rose by $25 billion and stocks by $10.1 billion from the month before.  The drawing power of U.S. assets for foreign investors is likely to continue strong as economic expansion continues to outpace other G7 countries.  The economy expanded 3.6 percent in the second quarter.

Richard Lee is a Currency Strategist at FXCM.