1. Australia Producer Price Index
2. Canadian Retail Sales

Australia Producer Price Index (4Q) (0:30 GMT; 19:30 EST)
Consensus: 0.9%
Previous: 1.5%

Outlook:  Producer prices in the fourth quarter are expected to have increased by 0.9 percent, just slightly lower than the previous quarter's 1.5 percent rise.  Surging oil prices and raw material costs began to retreat in the closing months of the year-a sharp contrast from the gloomy situation facing producers in the third quarter.  However, with energy prices still hovering above their historical averages, an incremental rise in costs should be expected. Economists look at producer prices for signs of inflationary pressure, as businesses tend to pass along their higher input costs to consumers in an effort to maintain their profit margins.  With consumer price data coming later in the week, the Reserve Bank of Australia will be able to determine whether or not inflation is being contained within the 2-3 percent target range.  Rising inflation has been a primary concern to the Central Bank policymakers, but weak economic data has forced them to leave interest rates unchanged at 5.5 percent.

Previous:  The Producer Price Index rose by 1.5 percent in the third quarter-the largest gain since 2001.  Spurred by surging oil and fuel costs, an increase in price pressure continues to threaten the world's fifth largest economy.  Rising producer prices are expected to have a spillover effect into the consumer market, which may cause inflation to rise above the RBA's 2-3 percent comfort zone.  This was evidenced when the CPI recorded a 0.9 percent rise during the same time quarter  - striking fear into policymakers that inflation may be a potential problem in 2006.  With high energy prices expected to stay, the next few months of economic data may cause the Central Bank to consider raising interest rates in an effort to fight inflation. 

Canadian Retail Sales (NOV) (13:30 GMT; 8:30 EST)
Consensus: 0.5%
Previous: 0.6%

Outlook:  Comprising more than half of Canada's gross domestic product, retail sales are expected to edge lower.  Several underlying economic factors may hinder the full potential of retail sales. Unemployment is at 6.9 percent, a dip from an all time low in November and the RBC consumer attitude index, a measure of consumer confidence fell to 78.2 from 85.5 in December.  Furthermore, wholesale sales dropped down to 0.2 percent in November mainly due to a decline of auto sales.  As an indication for consumer spending, retail sales for November will certainly be watched closely as the Bank of Canada and policy makers meet Tuesday to try to assess how many interest rate hikes are in the future.  Positive retail sales results will surely increase the probability of more hikes in Canada's overnight lending rate after last week's weak CPI and manufacturing reports.

Previous:  In October, retail sales increased for the first time in three months to C$31 billion, the third highest ever.  The Bank of Canada took the 0.6 percent gain as reinforcement to raising interest rates in order to combat the inevitable inflation of the expanding economy.  Retail sales increased twice the expected rate, and provided even more evidence that Canada's economy is running close to capacity.  High consumer confidence stimulated by a jobless rate drop to 6.4 in September-along with wages rising the fastest pace in more than five years-prompted strong household spending.  If consumer spending remains strong, it is likely fuel a bullish Canadian dollar, as it encourages more rate hikes. 

Richard Lee is a Currency Strategist at FXCM.