1. German GFK Consumer Confidence
2. KOF Swiss Leading Indicator
3. U.S. Gross Domestic Product
4. U.S. Personal Consumption
5. GDP Price Index
6. US New Home Sales

German GFK Consumer Confidence (JAN) (7:00 GMT, 2:00 EST)
Consensus: --
Previous: 3.4

Outlook: Germany's GFK consumer confidence should show a rise for January as it seems that the German economy is gaining momentum. Today's IFO confidence index showed that German firms were more confident about current business conditions, as well as the future of business conditions. This strong overall economic confidence should be reflected in Friday's GFK consumer confidence index, which is also a predictor of consumer spending in upcoming months. The previous report placed an estimate of 3.8 for the January results. If this reading comes in as expected, it will indicate that consumer spending should continue to grow in the future especially since the sub-index measuring the propensity to make large purchases achieved its first positive figure since 2001 in December. With Germany being the greatest economic power driving the Eurozone, sustained growth in Germany could eventually motivate the European Central Bank to consider raising interest rates again soon.

Previous: Germany's GFK consumer confidence index rose to 3.4 in December after November's revised reading of 3.3. The index, which intends to predict household spending one month in advance, is actually a five question survey given to about 2,000 people. December's reading was the highest since April, when the index read 5.0. Most notably in December, consumers' economic outlook rose to 11.9 from -8.6 in November. Also, consumers said they were much more willing to make large purchases in December then they were the previous month. Still, income expectations remained low as unemployment continued to grow in Germany.

Swiss KOF Leading Indicators (JAN) (10:30 GMT, 5:30 EST)
Consensus: 1.43
Previous: 1.36

Outlook: Switzerland's report on leading economic indicators is expected to increase in January, with estimates touting a slight rise from 1.36 to 1.43. Europe's eighth-largest economy continues to be bolstered by strong export growth, causing the Swiss National Bank to consider ratcheting interest rates higher as the year progresses. The increased demand for exports is leading domestic businesses to hire additional workers, resulting in lower unemployment rates and higher wages. Germany * Switzerland's largest export partner * recently announced a series of positive economic news, with the IFO Expectations and Business Climate readings soaring above the 100-level. With nearly 20 percent of Swiss goods and services being sold to Germany, the bullish sentiment is likely to underpin continued strength in the manufacturing sector. Incidentally, export growth and domestic consumption are expected to remain robust, and it therefore seems plausible that the SNB will raise their benchmark-lending rate higher as growth and inflation begins to accelerate.
 
Previous: The KOF Leading Indicators report climbed to 1.36 in December, its highest level in more than five years. Handily beating estimates of a decline to 1.17, the report helped shed some light on the strength of the growing economy. A rise in foreign demand for exports appeared to be the primary driver, as the weakened currency in 2005 made goods much more competitive in the global marketplace. This latest reading shows that the economy is on much more solid ground than originally anticipated, which is further confirming the SNB's decision to raise interest rates for the first time in nearly a year. Since the KOF indicator aims to predict the direction of the economy in the next six months, a continuation of positive readings would indicate additional rate hikes sometime in the near future.

U.S. Gross Domestic Product (4Q A) (13:30 GMT, 8:30 EST)
Consensus: 2.8%
Previous: 4.1%

Outlook: It seems that the string of interest rate hikes in the latter portion of 2005 may have been effective in curbing overall economic growth in the United States. Tomorrow's expectation of a weak 2.8 percent GDP growth for the fourth quarter, will be the end of a ten quarter streak of over 3 percent GDP growth and will be the slowest annualized quarterly growth in 14 years. Slow October vehicle sales are one of the main factors contributing to the expected weakness. However, this slowdown should prove temporary as business investments grew over the period indicating that firms are expecting 2006 to be a strong year. Although last quarter's GDP growth should come in low, it is unlikely that it will deter the remaining few rate hikes, as the FOMC is expected to bring the overnight rate to 4.5 percent next week while another increase could be on the agenda in March.

Previous: The US economy boomed in the third quarter showing an annualized quarterly growth rate of 4.1 percent from the second quarter. The total value of goods and services produced in the US for the third quarter rose to an annualized nominal figure of $12.6 trillion. The latest growth figure outpaced the second quarter's 3.3 percent increase and is indicative of a strong trend in US GDP growth as it has been in excess of 3 percent for two and a half years now. Third quarter GDP gains were fueled by strong consumer spending over the period. In addition, the third quarter hosted strong manufacturing, home building and auto sales. Although a growth rate of 4.1 percent is already rather high, the technical note from the BEA shows that the figure could've been even higher if it wasn't for Hurricane Katrina and Rita, which shaved off an annualized figure of $165.3 billion from GDP.

U.S. Personal Consumption (4Q A) (13:30 GMT, 8:30 EST)
Consensus: 0.5%
Previous: 4.1%

Outlook: Personal consumption is one of the last economic releases due before the Fed meets to decide on interest rates. Should personal consumption growth fall to the expected 0.5 percent from 4.1 percent from the third quarter, it would be the slowest pace since 1991. US consumer spending accounts for approximately 70 percent of the economy, however, the fourth quarter figure may be skewed from weak auto sales due to the expiration of employee discount promotions. Furthermore, the lagging effects of Hurricane Katrina and Rita may have also pared back consumption readings. In contrast, with improving wages and the jobless rate down to 4.9 percent, it would not be surprising if personal consumption posted a slightly higher figure than expected. According to the University of Michigan Confidence index, which improved by 1.9 points to a 93.4 reading, consumers are confident and more willing to spend. Most likely, the temporary slowdown was catalyzed by temporary factors and it is probable that personal consumption growth will improve in the first quarter of 2006.

Previous: Expanding at the fastest rate in the third quarter at 4.1 percent, the economy showed surprising resilience after being tested during the devastating hurricane season. Consumers took advantage of automobile employee discount plans resulting in a short-lived boost in the personal consumption figure with spending on durable goods rising by an annualized pace of 9.3 percent. Nonetheless, the rate of personal consumption in addition to GDP rising faster than prices showed evidence that the US economy was growing at a rapid pace, indicative of more interest rate hikes in the future. Furthermore, the still-elevated level of business investment reflects that US business also anticipate economic health to continue into the next few quarters and are reinvesting their increased profits in anticipation of improvements in corporate performance.

US GDP Price Index (4Q A) (13:30 GMT, 8:30 EST)
Consensus: 2.7%
Previous: 3.3%

Outlook: The GDP Price Index is expected to moderate slightly in the fourth quarter, down to 2.7 percent from the previous 3.3 percent. A dip in the inflationary gauge comes on the tail of falling energy prices, which soared to record high levels in the third quarter after Hurricanes Katrina and Rita tore through the Gulf Coast. Incidentally, the Fed Beige Book Survey of Businesses reported last week that the pickup in manufacturing and employment helped the US economy expand with competition and lower energy costs holding down price increases. Lending further support to these comments are the tame CPI readings that we have been seeing since October with November's 0.6 percent decline representing the biggest monthly drop since July of 1949. Although the US economy continues to grow rapidly, inflationary pressures are likely to remain subdued, which is probably why the Federal Reserve believes that they are reaching a "neutral" benchmark-lending rate.

Previous: The Price Index tied to GDP was revised upwards in the third quarter, with the annual figure printing 3.3 percent versus the anticipated 3.0 percent. Hurricane-related disruptions and sky-high energy prices were the culprits, leaving producers to figure out creative ways to pass on their elevated costs to consumers. Since this price index includes the volatile food and energy components, it is of no surprise why inflation crept higher during the third quarter. However, with energy prices widely expected to moderate in the coming months, Fed policymakers may be ready to take a breather on rate hikes in the near future as the threat of inflation dies down.

US New Home Sales (DEC) (20:00 GMT, 10:00 EST)
Consensus: 1230K
Previous: 1245K

Outlook: New home sales are expected to drop from 1245k to 1230k in December. Two days earlier, existing home sales dropped 5.7 percent from November, the lowest level since 2004. The housing sector has steadily declined suggesting that the housing bubble has finally begun to cool after the numerous interest rate hikes that the Fed has delivered since the summer of 2004. However, the housing market could be more volatile than thought and even more so, the validity of housing figures is being questioned. Affected by harsh weather and unpredictable conditions, fluctuations in construction and industry-related employment were undoubtedly influenced. Taking hold of approximately 15 percent of the market, new home sales have boosted economic growth by inducing construction and household spending. A slowdown in this area could subdue the US economy.

Previous: Although November's new house sales were below the previous 1404k, recorded in October, it still remained 6 percent above last year's figures. Ignoring October's inflated report caused by Hurricane Katrina, new home sales have stayed relatively tepid after 5 years of robust growth. Mirroring the UK slowdown, a housing market that continues to weaken may cause a ripple effect influencing deceleration in manufacturing and employment, which could eventually contribute to an overall slowdown in the US economy.

Richard Lee is a Currency Strategist at FXCM.