UK Producer Price Index s.a. (MoM) (JAN) (09:30 GMT; 04:30 EST)
                       Input        Output
Consensus:      1.2%         0.2%
Previous:          0.9%        -0.2%

Outlook: Producer prices likely accelerated in January as tensions in Iran lifted the average price of crude oil rose to $68 a barrel in January from $61 a barrel in February.  Year-over-year producer input prices are expected to have risen 13.7 percent for January after registering at 17.2 percent for December.  In January 2005, oil prices averaged $48 a barrel.  With continuously increasing competition from countries where labor is inexpensive, such as China, UK manufacturing, which comprises 15 percent of its economy, seems to be continuing its downward spiral.  Ultimately, producer margins are expected to shrink yet again as manufacturers are unable to pass higher prices onto retail stores without losing market share.  As a result, consumer prices likely rose by a modest 2.1 percent on a year-over-year basis in January while retail prices likely rose by 2.4 percent.  Suggestive of a slowdown in inflationary pressures, recent consumer prices may rise once again if producers are faced with thin bottom lines due to higher costs.

Previous: Mixed data in December left the sterling pound unsettled as producer input prices rose greater than expected, but output prices unexpectedly dropped 0.2 percent.  The news again illustrated shrinking margins amongst British producers, highlighting the struggling industry as foreign competition stiffens.  Last year, British manufacturing fell into its second recession in five years.  The data appeased the Bank of England, as it showed that producer output prices remained largely contained.  Consumer prices rose by a modest 2.0 percent on a year-over-year basis.  Subsequently, on February 9th, the BoE voted to leave interest rates unchanged.

Richard Lee is a Currency Strategist at FXCM.