1. US Producer Price Index
2. University of Michigan Consumer Confidence Index

US Producer Price Index (JAN) (MoM) (13:30 GMT; 08:30 EST)
Consensus:      0.2%       
Previous:     0.6%      

Outlook:   Prices paid to producers is expected to slow once again in the month of January as managers keep losses accumulated by raw material prices on their own books.   Undoubtedly the biggest drain on revenues for the month came from crude prices that reached its highest level since its dramatic climb in late-August, early-September.  Slipping profits continue to force the issue of passing on the higher prices of raw materials onto consumers, but at the expense of loosing their competitive edge to foreign producers.  While companies remain cautious in passing through prices, consumers seem to be in a better position to accept them.   According to the Conference Boardââ,¬â"¢s measure of consumer confidence, optimism rose to its highest level since June of 2002 in January on strong labor numbers.  The available numbers on retail sales may have put managers in a state of caution however.  Riding off of weak sales numbers in December, producers were left little to increase confidence that their sales levels would survive higher prices.  Hindsight however shows that Januaryââ,¬â"¢s 2.3 percent rise in sales was not a repeat of Decemberââ,¬â"¢s weak 0.4 percent number.  As long as companies retain the burden of higher raw material costs, second round inflation will elude consumer prices and reduce the need for rate hikes.  However, as consumers regain their confidence and prove they are willing to spend, managers will be expected to slowly pass on their ballooning costs into the domestic market.

Previous:  US producer prices rose a revised 0.6 percent in the final month of the year after managers decided not to pass on higher raw material and intermediate good prices onto consumers in order to stay competitive with foreign companies.  Producers over the month of January were once again feeling the squeeze of higher energy and raw material costs on their bottom lines.  For the month energy prices rose 3.1 percent while on an annual basis it was still 24 percent higher.  Additionally, prices for intermediate goods, those partially finished, followed up on Novemberââ,¬â"¢s 0.3 percent rise with another 0.2 percent increase.  These added pressures to US producers were already facing a 0.2 percent decline in the prices of imports.  Domestic companies responded to the competition by offering discounts on their products running into the holiday seasons.  Results of the special promotions were still disappointing with retail sales rising only 0.4 percent for the month.

University of Michigan Consumer Confidence Index (FEB P) (14:45 GMT; 09:45 EST)
Consensus:      91.0
Previous:     91.2

Outlook:   The University of Michigan will offer the market its first glimpse into consumer confidence for the current month as job growth and higher wages continue to vie for sentiment with higher energy prices and a deflating housing bubble.   Similar to the previous monthââ,¬â"¢s confidence report, the U. of M. index will find much of its upward strength through the jobless rate.   The Unemployment rate fell to 4.7 percent in January, the lowest it has been since July of 2001.  On the other hand, gasoline prices, though somewhat cheaper from the previous two months, are still much more expensive than a year ago.  Furthermore, the necessary goodââ,¬â"¢s extreme volatility can quickly bring its price back near record levels, as has happened in December.  Confidence tied to the housing market will also play on consumerââ,¬â"¢s doubts.  Housing sales and prices have steady fallen from highs set in the previous year as higher interest rates begin to really take their toll.  Despite the draws on confidence for the period, expectations for the U. of M.ââ,¬â"¢s survey remain high and should support domestic spending which accounts for nearly 70 percent of the economy.

Previous:  Confidence remained near its 5-month high in January as higher gasoline prices kept optimism on employment and wage growth in check.  The survey tracked by the University of Michigan edged slightly lower to 91.2 from the previous Decemberââ,¬â"¢s 91.5.  Optimism among US consumers was strengthened for the period by a December jobless rate at 4.9 percent, revealing that the business sector has bounced back from Hurricane Katrina quickly.  Furthermore, wages grew by a second month of 0.4 percent following Novemberââ,¬â"¢s stagnant number.  The higher level of disposable income this left the consumers over the period was met with a helping hand from nature.  One of the mildest Januaryââ,¬â"¢s on record left many thermostats low and helped to push down heating bills.

Richard Lee is a Currency Strategist at FXCM.