1. Japanese Consumer Confidence
2. German Consumer Price Index
3. U.S. Empire Manufacturing
4. U.S. Industrial Production

Japanese Consumer Confidence (DEC) (5:00 GMT, 0:00 EST)
Consensus:  N/A
Previous:  48.2

Outlook: Signs of a strengthening economy is likely to boost consumer confidence for the third straight month in the Japanese economy.  Consumer sentiment has been increasingly positive as all sub categories that comprise overall consumer confidence have risen for the past three consecutive months.  Along with improvements in overall livelihood and willingness to buy durable goods, both income growth and employment recorded notable results, with employment passing the 50 point benchmark reading at 50.8.  Additionally, although small gains in consumer confidence are recognized, consumption has been increasing at a slower pace.  Overall household spending failed to meet expectations dropping 1.3 percent from 0.1 percent.  If consumer confidence does not translate into elevated consumer spending, the Bank of Japan may be forced to remain patient until economic growth clearly increases.

Previous: Consumer confidence rose for the second straight month to a reading of 48.2 from 47.9 in October.  Although consumer confidence is under 50, a reading under 50 signifies the number of pessimists outnumber optimists, many aspects of the Japanese economy imply that consumer confidence will remain on the uptrend. Wages improved 0.5 percent for the fifth increase in six months and in light of unemployment rising to 4.5 percent in the month of October.  If the job front continues to improve, higher consumer confidence will encourage consumption underpinning growth in the world's second largest economy.  Furthermore, with higher rates of consumer consumption, the Bank of Japan will have to at least consider the notion of ridding the nation of accommodative easing as overall growth picks up.

German Consumer Price Index (DEC F) (7:00 GMT, 2:00 EST)
Consensus:   0.8%
Previous:  -0.5%

Outlook: Germany is scheduled to release its final printing of consumer price changes from the month of December on Tuesday. The preliminary estimate called for an increase of 0.8 percent at the consumer level. Although impressively expected above the decline of 0.5 percent seen last month, the current figure may be considered an overvaluation of growth in the overall economy as prices in December were higher due to increases in such goods as food, and holiday packages.   More importantly, Germany, which makes up two- thirds of Euro-based inflation, has the largest impact on European Central Bank monetary policy. The policy makers raised their benchmark rate to 2.25 percent in early December in attempts to curb Germany's inflation rate to below 2 percent. Now, it is expected that this should be easily attainable considering the decline in energy costs. Nonetheless, Tuesday's revised CPI figure will likely give the ECB further justification for the one or two of the rate hikes expected over the year.

Previous: Germany's consumer price index dropped by 0.5 percent in the month. Subsequently, the figure is representative of an overall drop in the average price changes for all commonly used goods and services and looks to be attributed to a decrease in energy prices. Crude oil hit its peak in August at $70.85 a barrel but gradually declined since then. In particular, for the month of November, crude oil decreased by about 5 percent allowing producers to pass these savings onto their consumers. Comparatively, food prices actually increased over the month of November by 0.5 percent. 

U.S. Empire Manufacturing Index (DEC) (13:30 GMT, 8:30 EST)
Consensus:  22.0
Previous:  28.7

Outlook:  The Empire Manufacturing Index is expected to report 22.0 for the month, moderating from the 17-month high of 28.7 in December.  The number would still be higher than the 15.6 average in 2005, with readings above zero indicating growth in the industry.  Each month, the Federal Reserve Bank of New York sends out a survey to 200 manufacturing executives in the area, and is just one of the many tools that economists use to determine the health of the manufacturing sector.  With rebuilding of the Gulf Coast region continuing to boost production capacity, it seems very likely that the Index will continue its growth pattern that has held solid for the last two and a half years.  The report comes in just shortly before industrial production data, and both economic indicators are certain to weigh heavily on the shoulders of the Federal Reserve before their meeting later this month.

Previous:  The Empire manufacturing index rose unexpectedly to 28.7 in December, surging from the November reading of 22.8.  The Index figure was a 17-month high and indicates expansion within the manufacturing industry.  The new orders index rose slightly to 30.2, sending a message to economists that businesses are continuing to ramp up spending in the midst of a Gulf Coast recovery.  Comparatively, the index of inventories was negative in December, implying that the demand for goods is accelerating and manufacturers will likely increase their current output.  Future indexes representing forward-looking sentiment in the next six-months, were also on the rise in December * another sign of strength in the industry.  Subsequently, expectations point out that the bullishness in manufacturing could potentially lead to future inflation risks, as it is tied very closely to business spending.  This may leave the Federal Reserve with the difficult task of weighing the possible scenarios should the streak continue. 

US Industrial Production (DEC) (14:15 GMT, 9:15 EST)
Consensus:  0.6%
Previous:  0.7%

Outlook:  Industrial production is expected to have risen 0.6% in December, just marginally lower than the 0.7% increase last month.  The production lines at factories, mines, and utilities have been running at full capacity lately, making an active effort to keep pace with increased business orders and depleting inventories.  If expectations for the month are met, the average production gain of 0.8% from October to December would mark the best quarterly performance since 1999.  This scenario seems quite plausible given the most recent manufacturing reports that came in bullish.  The Empire Manufacturing Index rose to a 17-month high of 28.7 and the Philly Fed Index printed 10.9 last month, with readings above zero indicating expansion in the industry.  Furthermore, the aftermath of Hurricanes Katrina and Rita has caused reconstruction along the Gulf Coast to boom, lending further support to the increase in production.  The Federal Reserve will be watching the data with a keen eye, as capacity utilization most likely rose to 80.5% - the highest level since November of 2000.  Rising output is reducing the amount of unused capacity, and any type of constraints often lead to a pickup in inflation.  A bullish report would come on the tail of weaker consumer spending data in the US, throwing a wrench in the underlying theory that the Fed's interest rate cycle may have finally come to an end.

Previous:  Industrial production rose 0.7% in November, posting a back-to-back monthly gain that was the highest recorded in nearly eight-years.  The recent surge in production is a direct result of rebuilding and replenishing * efforts made by businesses who were tragically affected during the hurricane season last summer.  Capacity Utilization held strong at 79.4%, a level matching the five-year high and closely approaching the historically significant 81% level.  Bottlenecks tend to develop when less production capacity is available, and this poses a significant inflation threat to the Federal Reserve.  Data from the manufacturing industry will be critical in the coming months as policy makers ponder how much further they must go with their tightening efforts.

Richard Lee is a Currency Strategist at FXCM.