1. U.K. Retail Sales
2. Canadian International Securities Transactions
3. Philadelphia Fed Index
4. Japanese Gross Domestic Product

U.K Retail Sales (JAN) (9:30 GMT; 4:30 EST)
Consensus:     -0.2% (MoM)
Previous:     0.4% (MoM)

Outlook: The confidence economists began to place in the United Kingdomââ,¬â"¢s economic growth towards the end of last year is likely to wane given estimates that January retail sales will likely decline by 0.2% from the previous month.  Spending in the latter half of last year increased after the Bank of England eased monetary policy.  However, interest rate futures trading reveals the building of sentiment that the BoE may have to begin to raise rates at some point in the middle of this year if spending continues to decline.  Two-thirds of the U.K. economy is dependent on spending, 40% of which is dependent on retail sales.  The likelihood of a fall in retail sales is bolstered by Januaryââ,¬â"¢s increase in the number of jobless claims filed by British workers.  Furthermore, wage rate increases have begun to stagnate on a quarterly basis.  In addition to bleak employment data, consumer debt stands at an all-time high, leaving consumers with less room to wiggle when it comes to personal expenditures.  

Previous: Retail Sales in the U.K. rose by 0.4% in December, up a remarkable 4.0% from the same time the previous year.  This marked the fifth straight month-to-month increase in sales.  Consistent spending in the latter half of 2005 helped the British economy to regain its footing after a painstakingly slow rate of growth earlier in the year.  Holiday spending on electronics and home furnishings gave the sales figure a necessary boost.  A 5.2% increase was measured in the purchasing of goods such as furniture, flat panel televisions, and portable audio players.  Some of the countryââ,¬â"¢s largest retailers saw as much as a 7% increase in sales over the month.  Decemberââ,¬â"¢s growth in retail sales adds to a string of spending increases since the Bank of England decided to reduce interest rates in August to jump-start the economy. 

Canadian International Securities Transactions (DEC) (13:30 GMT; 8:30 EST)
Consensus:     C$4.5B
Previous:     C$5.4B

Outlook: In December, investment from abroad in Canadian securities is predicted to decline to C$4.5B.  While the figure is still expected to be strong, investment will suffer for a number of reasons.  Investors are expecting short-term interest rates in the United States to rise at a faster pace than in Canada, which will cause the interest rate differential between the two nations to widen.  As a result, the recent appeal of Canadian bonds will begin to diminish.  Being that U.S. citizens have been the largest purchasers of Canadian fixed-income securities, international investment will take a considerable hit.  Furthermore, foreign investment in Canadian equities has traditionally been through the purchase of stock in energy companies.  As oil and natural gas prices begin to decline, investment in Canadian stocks will also begin to wane.  Thus far in 2006, crude oil prices have fallen below the $60/barrel mark, which does not bode well for equity in Canadian energy companies. 

Previous: Foreign investment in Canadian securities reached an annual high in 2005 as non-residents purchased C$5.4B worth of the countryââ,¬â"¢s securities.  C$3.5B, over two-thirds of the total investment, was made in Canadian bonds, which have experienced heavy international purchasing in the three months leading up to and including November.  United States citizens were responsible for the bulk of the Canadian bond purchasing as the short-term interest rate differential between the U.S. and Canada dropped to 0.57% from 0.65% the month before.  British and Asian investors also bought large volumes of Canadian securities as the nationââ,¬â"¢s S&P/TSX composite stock index finished 4.2% higher on the month.  Unsurprisingly, the Canadian dollar strengthened by 0.01 USD in November as traders recognized the increased demand for the CAD on heavy Canadian security purchases.  

Philadelphia Federal Reserve Index (FEB) (17:00 GMT; 12:00 EST)
Consensus:     9.2
Previous:     3.3

Outlook: The Philadelphia Federal Reserve expects the areaââ,¬â"¢s manufacturing sector to return to higher output levels in February.  The Philadelphia Fedââ,¬â"¢s economic climate index is likely to issue a reading of 9.2.  In January, the figure stood at 3.3, which indicated that business climate at the time of the survey was weaker than expected.  However, future outlook on orders, shipments, and employment was higher at the time of Januaryââ,¬â"¢s survey than a month earlier.  As such, economists are predicting that the regionââ,¬â"¢s industrial sector will return to a state of rapid expansion.  Manufacturing will benefit from the jump in demand for automobiles witnessed in January, which has amounted to an increase in production orders.  Additionally, new home construction in the start of 2006 has been stronger than expected.  This will also add to the volume of incoming orders at industrial companies as will increasing foreign demand from expanding economies in China and Japan.

Previous: Expansion in the Philadelphia areaââ,¬â"¢s manufacturing sector was mild in January according to the Philadelphia Federal Reserveââ,¬â"¢s economic climate index, which registered a reading of 3.3.  Although the reading above zero indicates growth, the pace of industrial proliferation was slower than economists expected.  The reading of 3.3 was the lowest in 7 months.  Manufacturers were forced to scale back on production as high costs of oil and natural gas made input resources expensive.  DuPont Co., the nationââ,¬â"¢s third-largest chemical maker based in Wilmington, Delaware, reported that profits fell by over 60% in the final quarter of 2005.  Heading into January, the company was still recovering from the heavy hit it took at the end of 2005.  Like other industrial companies, DuPontââ,¬â"¢s losses came largely from the destabilization of energy prices that resulted from the Gulf-coast hurricanes in the middle of the year.  Apparently many had underestimated the amount of time it would take before stable input prices would allow manufacturers to return to higher levels of growth.

Japanese Gross Domestic Product Annualized (QoQ)(4Q) (23:50 GMT; 18:50 EST)
Consensus:    5.00%
Previous:    1.00%

Outlook:  The worldââ,¬â"¢s second largest economy is on track to see expansion in the fourth quarter five times greater than that in the three months ended in September according to the marketââ,¬â"¢s consensus.  Expectations of 5.0 percent annualized growth in the final quarter of 2005 have staved off fears of the economy once again falling into recession after growth slowed to 1.0 percent in the third quarter.  Forecasts of the dramatic rebound this time around are finding significant support where most economists and traders want to see it - from consumers.  Confidence among Japanese workers was stoked over the final months of last year by a healthy employment levels and strong wage growth.  The jobless rate, though slightly higher for the fourth quarter than the previous oneââ,¬â"¢s record low, held to a 4.5 percent average.  Similarly, wages grew consistently for the final three months culminating in a year high pace 1.6 percent.  Further, this confidence translated to a quarter of increased spending by households following a previous three months of contractions.  If achieved, this pace of growth would be more than three times larger than US or European expansion over the same period and put Japan back on track to higher interest rates.

Previous:  Growth in Japanââ,¬â"¢s economy unexpectedly slowed to a 0.2 percent pace in the third quarter as government spending and industrial output drained points off of growth already suffering from historically high energy prices.  For the three months ending in September, businesses and consumers alike were confronted with quickly rising crude oil and other energy product prices that crimped revenues and purchasing power.  Japanese companies, who rely on almost 99 percent imported crude oil, looked to unload existing inventories over the period instead of incurring higher costs in the higher priced environment.  Inventories fell over the quarter 0.4 percent.   A unique situation was also had by the government after the sitting Prime Minster Koizumi called a snap election to solidify support for a plan to spin off the money-draining insurance and postal system into public entities.  Putting the final nail in the coffin was consumer spending which was faced with higher gasoline prices that helped to erode much of the confidence gained by an unemployment rate at its lowest level in recent history.  The premier affect of the sharp contraction in growth for the market, was the potential jeopardization to potential rate hikes in the coming year, which may be considered only during healthy growth and sustainable inflation.

Richard Lee is a Currency Strategist at FXCM.