1. Japanese Household Spending
2. French Industrial and Manufacturing Production
3. Canadian International Merchandise Trade
4. U.S. Trade Balance

Japanese Household Spending (DEC) (MoM) (5:00 GMT; 0:00 EST)
Consensus:      1.2%       
Previous:     -1.3%       

Outlook:  Consumer spending in Japan, accounting for nearly half of the economy, is expected to have risen 1.2 percent for the month of December.  This estimate is backed by several, very influential indicators.  The first of these indicators, and perhaps misleading, is consumerââ,¬â"¢s optimism.  While confidence for the period fell back to a three month low 46.5, confidence for the entire fourth quarter was at its highest level in over 14 years as expectations of an economic recovery finally materialized became more plentiful.  Also supporting spending habits for the period were strength in the labor market and earnings.  The jobless level in December fell to 4.4 percent, edging closer to the recent historical low set in August at 4.2 percent.  A positive change, but even better when taken in context to the change in the job/applicant ratio.  According to the indicator, there were enough jobs for every person looking for one for the first time in 13 years.  The large increase in earnings for December also likely helped to open Japanese pocketbooks.  Labor earnings rose an annually measure 1.6 percent in the final month of the year for the largest increase in over a year.  Rounding out the lineup of evidence is the foretelling retail sales number for the same month.  Sales at retailers rose 0.8 percent in December - a five month high.  If expectations are met or exceeded for spending, its effects on inflation and growth will only bring the Bank of Japan one step closer to finally considering an interest rate hike.

Previous:  Spending by Japanese households fell 1.3 percent in November to an average 284,465 yen, leaving the measure unchanged from the same time a year ago.  Representing the third consecutive monthly decline in spending, it seemed spending at households headed by wage earners was wavering in the midst of finally emerging from a recession that has been on and off for the last seven years.  Though spending for the period made a repeat decline, factors supporting consumersââ,¬â"¢ optimism were actually lending themselves to a more liberal spender.  Earnings nudged higher for the third straight month, further boosting confidence among the Japanese to a similar term high 48.2.   Further more, from the companyââ,¬â"¢s perspective, spending rose for 0.2 percent in November based on the measure of retail sales.  This inconsistent indicator represented the broader apprehension among consumers, investors and businesses in Japan that remain leery over the potential for the country to finally emerge from its economic instability for certain.

French Industrial Production (DEC) (MoM) (7:45 GMT, 2:45 EST)
Consensus: 0.2%
Previous: 3.1%

French Manufacturing Production (DEC) (MoM) (7:45 GMT, 2:45 EST)
Consensus: 0.2%
Previous: 2.6%

Outlook: Industrial production and manufacturing production in France are both expected to have slowed their growth rate to 0.2 percent in December.  The slowdown in production is likely to result from lack-luster consumer spending over the month.  Purchases of manufactured goods, which account for 15 percent of French GDP, fell by a seasonally adjusted 1 percent.  The weak domestic demand for industrial products is a reflection of meager consumer confidence, which has been at near-record lows as large French employers continue to cut jobs.  As a result, consumer spending took its biggest drop in seven months and dragged down economic growth in the fourth quarter.  Ordinarily, December expenditures are strong on holiday enthusiasm.  This past December, however, consumer spending posted its first decline in 7 holiday seasons.  Heavily dependent on domestic consumption, industrial production is expected to slow.  However, growth will remain positive as indicated by a December PMI reading above 50.

Previous: In November, French industrial and manufacturing production expanded on heavy domestic purchasing.  From October to November, purchases of manufactured goods increased 0.7 percent and rose by 2.7 from the same time the previous year.  With domestic expenditures accounting for over half of the nationââ,¬â"¢s economy, this increase in spending served as impetus for managers to increase production.  In addition, prices for producer inputs realized deflation of 0.3 percent in November.  As a result, producers were able to increase output levels without incurring higher costs.   

Canadian International Merchandise Trade (DEC) (22:00 GMT; 17:00 EST)
Consensus:     C$6.9 B
Previous:     C$6.9 B

Outlook:  Statistics Canada is expected to report Canadaââ,¬â"¢s surplus was unchanged at C$6.9 billion in the final month of the year.  While imports for the month will be well supported as the unemployment rate hovers near 30-year lows and consumersââ,¬â"¢ penchant for spending continues to rise, the change in Canadaââ,¬â"¢s persistent surplus will really rest with the strength of exports.  And once again, the bulk of the change in exports will rest with ever volatile commodity prices.  Whereas natural gas prices in December continued to drop another 27 percent from the month before, an 11 percent rise in crude oil will help to boost the bottom line.  Autoââ,¬â"¢s shipments, the other large export out of Canada, are likely to have been limited rebounding gasoline prices in destination markets.  Going forward, the level of the trade surplus is likely to increase in importance as a barometer for gauging the strength of the economy.  Strong sales abroad of Canadian goods, especially raw materials, have helped to lead the worldââ,¬â"¢s eighth largest economy on nearly three years of strong growth and keeping it operating near full capacity.  So far, exports have been unaffected by an expensive currency; but if this relationship changes in the future points could be shaved off of GDP and scope for rate hikes will be abandoned.

Previous:  Canadaââ,¬â"¢s trade surplus contracted to C$6.9 billion in November as exports of natural gas and other energy products detracted from the net balance.  While this marks the first contraction in the surplus in seven months, economists point out that the decline was not the result of a reduction in quantity exported, but was rather from lower prices for Canadian goods on the global market.  Exports from Canadian producers fell for the first time in nine in November by 2 percent to C$39.7 billion while imports were little changed at C$32.8 billion.  Pacing the level of pared back exports for November were a 9.5 percent decline in natural gas and an 8 percent drop in the price of crude oil with unusually mild winter temperatures suppressing prices.  Slightly offsetting the considerable decline in energy products for the period were auto exports which rose 1.9 percent.   Following the release of this indicator, speculation over whether the BoC would continue its aggressive tightening path circulated through the markets.  These fears were quelled however after participants considered the contraction in the surplus was off of record levels and demand for energy prices is not expected to diminish anytime soon.

U.S. Trade Balance (DEC) (13:30 GMT, 8:30 EST)
Consensus: -$65.0B
Previous: -$64.2B

Outlook: In December, the U.S. trade balance is expected to widen again to -$65.0B after a brief contraction in November.  A December deficit of $65.0B will bring the total deficit for 2005 to $727B.  The U.S. dollarââ,¬â"¢s relative strength in 2005 has been responsible for much of the loss in appeal for U.S. exports.  Holiday fervor exacerbated the nationââ,¬â"¢s trade deficit as U.S. consumers engaged in heavy purchasing of imported goods, particularly cars, clothing, and electronics.  With Decemberââ,¬â"¢s widening deficit adding to Octoberââ,¬â"¢s record imbalance, fourth quarter GDP growth will take a severe hit from trade data.  A growing deficit in December is sure to spur further condemnation of Chinaââ,¬â"¢s currency policy from U.S. legislators and government officials. 

Previous: The U.S. trade balance made significant improvements in November when the figure amounted to -$64.2B, up from a record low of -$68.1B a month earlier.  The contraction resulted from soaring exports in aircraft, machinery, and consumer goods.  The nationââ,¬â"¢s trade deficit with China shrank for the first time in eight months as demand for U.S. goods continues to increase in the worldââ,¬â"¢s fastest growing major economy.  Growth in Japan has also fueled an increase in U.S. exports as Japanese consumers have initiated a consistent pattern of consumption.  The U.S. trade balance also benefited from cheaper imports.  In particular, the declining cost of fuel imports served to alleviate the nationââ,¬â"¢s trade balance.  Across the board, the price of imported goods fell 1.8 percent in November.

Richard Lee is a Currency Strategist at FXCM.