1. BoJ Rate Decision
2. Eurozone CPI
3. US Current Account Balance

BoJ Rate Decision (December 16) (6:00 GMT, 1:00 EST)
Consensus: 0.00%
Previous: 0.00%

Outlook: December's Bank of Japan policy-setting meeting will most likely bring another stay in rates and the cash target range. However, market participants are looking for further indication from the Bank on the end of deflation and also the end of the zero-rate policy stance. The latest statement from BoJ Governor Toshihiko Fukui, made on December 8, was that he expected deflation to end sometime in the next quarter and that the bank would be “gradually adjusting interest rates to a level consistent with economic activity and price developments". Looking at some of the major Japanese economic indicators, consumer sentiment for households just had its third consecutive month of increase while industrial production growth has been positive for the past three months. Also, even though the final revision missed economists' expectations, GDP growth has also been positive for the past three quarters. These underlying developments in the economy should help push prices ahead and bring the BoJ closer to positive interest rates in the next few months.

Previous: In November, the Bank of Japan left interest rates and the cash target range unchanged yet again by a vote of 7 to 2. The statement published in “The Bank's View“ for November revealed few detected changes in Japan's economy. The Bank acknowledged that “domestic corporate goods prices have continued to increase”, but this was attributed to rising commodity prices and the yen's recent depreciation. However, the Bank also still expects consumer price deflation to end by the end of the fiscal year, or the first quarter of 2006, due to the dissipation of some negative effects such as the currently low rice, electricity, and telephone service prices. If this does indeed happen, it could signal a change in policy sometime in mid-2006.

Eurozone CPI (NOV) (10:00 GMT, 5:00 EST)
Consensus: -0.2% (MoM); 2.4% (YoY)
Previous: 0.3% (MoM); 2.5% (YoY)

Outlook: The flash estimate of Eurozone consumer price inflation for November was 2.4 percent, which reflects a continuation of October's fall in inflation from September's high. During the month, energy prices dropped even further which will contribute to this disinflation. Evidently, the December ECB rate decision, which was supposedly a result of inflation pressures, was most likely an unnecessary move. In addition, it is very likely that consumer price inflation will continue on its decline. Looking at the producer's side, annual inflation dropped in October to 4.1 percent from 4.4 percent. Meanwhile, annual labor costs growth also declined in the third quarter. If this trend in inflation continues and CPI moves back towards the 2.0 percent target, it is very likely that the ECB will not raise rates again in the foreseeable future.

Previous: In October, Eurozone CPI declined from its recent high of 2.6 percent as energy prices concurrently fell from their highs. Core inflation, which excludes energy items, rose for the second month in a row to 1.5 from 1.4. The subcategories which contributed most to the decline in the headline index were transportation, which is related to the declining gas prices, but also housing. Inflation in the real estate market reached a high of 5.5 percent on an annual basis in September. Although this is a sign that the market is cooling down along with the housing market in many other countries, the inflation rate is still high at 5.0 percent. Moving to the upside were clothing and footwear prices which emerged from the end-of-summer discounting season. Overall, despite the decline in CPI, the 2.5 annual rate was still much higher than the ECB's target of 2.0 percent. This along with the upbeat GDP reading for the third quarter prompted the ECB to raise interest rates by 25 basis points in December.

US Current Account Balance (3Q) (13:30 GMT, 8:30 EST)
Consensus: -$205.0B
Previous:  -$195.7B

Outlook: The current account balance is expected to expand to a record $205 billion for the third quarter. The previously released trade figures already show that the balance in goods and services increased by $9.2 billion to $182.8 billion in the third quarter. The quarterly growth in imports of 2.6 percent dwarfed the 1.1 percent growth in exports. However, looking at the income and unilateral transfers accounts, they may help offset some of the trade changes in the third quarter. The income payments balance is probably in for another decline, as has been the case for the past eight quarters since the US stock market took its turn in early 2003. However, insurance payments from foreign companies, such as Lloyd's of London, along with foreign government aid which resulted from Hurricane Katrina will cause a positive move in the unilateral transfers balance. Putting all of this information together, it is rather likely that the US current account deficit widened by a large degree during the third quarter.

Previous: The second quarter current account balance missed estimates of -$193 billion and came in at -$195.7 billion instead while the first quarter figure was also revised to -$198.7 billion. Because of the downward revision, this was actually the first time that the current account balance improved since 2003. The most significant change between the first two quarters of the year was actually not seen in trade in goods and services, but was rather from changes in income payments and unilateral transfers. The deficit on goods and services actually only expanded by $275 million while the balance on unilateral transfers improved by $4.4 billion, due to a large reduction in government aid grants. These changes were all overshadowed by a $7.5 billion expansion in the income balance. Although the decline in the deficit was a welcomed change, it was also evident that the slight improvement would be ephemeral as energy costs ballooned in the third quarter.

Richard Lee is a Currency Strategist at FXCM.