1. Bank of England Quarterly Inflation Report
2. U.S. Net Foreign Security Purchases

Bank of England Quarterly Inflation Report (10:30 GMT; 05:30 EST)

Outlook:  The Bank of Englandââ,¬â"¢s quarterly report on inflation is likely to reveal neutral comments to a currency market that is eagerly looking for either dovish or hawkish remarks from the usually mum monetary policy circle.  First in policy officialsââ,¬â"¢ purviews will be the commonly tracked, annually measure consumer price index.  Inflation slowed for four consecutive months in the end of 2005 after spiking to a record high 2.5 percent in September.  Energy prices have played a large contribution in this decline.  Petrol and heating fuel have both declined from record highs, lending directly to the drop.  Alternatively, prices paid at retailers will also factor into the bankââ,¬â"¢s report.  As the price of crude oil continues to soften, companies are less inclined to try and pass on higher costs onto customers who have already reigned in their spending habits.  Consumer confidence fell to its lowest level since March of 2003 in December according to GfKââ,¬â"¢s gauge.  This drop in optimism is a result of earnings growth at its lowest level in over two years, unemployment rising and public debt near historical highs.   Given this soft data, the Bank is likely to focus on growth, which slowed to a 13-year low in the final quarter, rather than focus on price growth that was at their target in November and recommend no change to monetary policy.

Net Foreign Security Purchases (DEC) (14:00 GMT; 09:00 EST)
Consensus:      $76.2B
Previous:     $89.1B

Outlook:   The Treasury Department is expected to report the second consecutive drop in foreign holdings of US assets in December, raising fears that shrinking investment in the US could fail to support the burgeoning trade deficit.  While the deficit in the trade of goods between the US and the rest of the globe has risen to $65.7 billion in December, foreign investment in US assets is expected to fall to $76.2 billion; the narrowest margin between the two since May.  Of the components that comprise the entire measure, foreign purchases of US treasuries will likely be the largest contributor.   During the final month of the year, the FOMC decided to raise the overnight lending rate once again to 4.25 percent, furthering its advantage over most other countriesââ,¬â"¢ governmental debt issues.  However, its fast pace of accumulation could be coming to an end soon as other major central banks, especially those of Japan and the European Union, have expressed their intentions of heading off inflation.  For the same period, investment in equities should garner little support for the total measure.   Following a strong 4 percent advance in the benchmark S&P 500 index in November, US equities failed to gain anymore ground the following month.

Previous:  Foreign interest in US assets pared back from a record high in November as net holdings of the countryââ,¬â"¢s treasury notes, equities, corporate bonds and other assets increased by $89.1 billion.  Leading the monthââ,¬â"¢s rise in overseas holdings was a record $54.6 billion net increase in Treasury securities.  Desire for US government debt was backed by a dozen consecutive interest rate increases that brought the Federal Reserveââ,¬â"¢s overnight lending rate to 4.00 percent - above all other major central bankââ,¬â"¢s benchmark rate except for the UKââ,¬â"¢s.  The appeal was obvious through the numbers as the United Kingdom paced increases by China, Japan, OPEC producers and others by purchasing a net $35.3 billion worth of the asset.  Investment in the corporate sector also showed healthy gains in November.  Foreigners added a net $35 billion in corporate debt instruments to their stores and portfolios, while net holdings of equities jumped rose $4.7 billion.  The purchase of US stocks was supported by the largest rally in the S&P 500 in a year - notching up 4 percent for the month.  However, major indices in other countries were outpacing that of the US, like the Nikkei 225ââ,¬â"¢s 7 percent advance and a 6 percent increase in Germanyââ,¬â"¢s DAX.

Richard Lee is a Currency Strategist at FXCM.