1. Australian Retail Sales
2. Swiss Gross Domestic Product
3. European Central Bank Rate Decision

Australian Retail Sales (JAN) (0:30 GMT, 19:30 EST)
Consensus: 0.3%
Previous: 0.4%

Outlook: Retail sales in Australia are expected to have grown 0.3% over January, marking the second straight month of expansion.  Supporting the case for advancement in sales volume is the 2.6% rise in the country's consumer sentiment index, which stood at 107.4 in January.  The rise in sentiment most likely stems from an alleviation of fears that the Reserve Bank may raise interest rates in coming months.  Clothing sales, which suffered in December, may have received a boost from a warmer than usual January.  Additionally, some retailers have expressed the benefit of warm weather on cooling appliances such as air conditioners and fans.  In spite of the predicted growth in sales volume next month, spending is not rising at a rate that can sustain economic growth on its own.  Fortunately, recent export figures in Australia have been strong, suggesting that foreign demand may pick up some of the slack left by weaker demand at home. 

Previous: Sales on the retail level in Australia rose 0.4% in December, showing slightly worse performance than the expected 0.5% gain.  Nonetheless, the rise in retail sales volume came after a 0.1% drop the previous month, keeping consumption from being a complete drag on fourth quarter GDP growth.  Growth in retail sales over the month is an indication that heavy discounts offered by retailers in the fourth quarter may have begun to convince shoppers to spend more.  While such tactics are useful in spurring purchasing activity, they can prove to be detrimental to profitability in the long run, which will detract from company growth going forward.  If economic expansion is to be sustained on spending, consumers will have to initiate a pattern of consumption that is not bound to retailer discounts.  The largest retail gains in December were in household and recreational goods, which rose 1.8% and 1.5% respectively.  In contrast, clothing and soft good sales fell 1.3%.

Swiss Gross Domestic Product (4Q) (06:45 GMT; 01:45 EST)    
Consensus:  0.6%  
Previous: 1.0%  

Outlook:  Europe's eighth largest economy is expected to report its largest annual rate of growth since the final quarter of 2000 with Thursday's report of GDP for the final three months of 2005.  The largely export-driven expansion is expected to have received an additional level of help for the period by continued strength in domestic consumption that has been spurred on confidence in the economy's strong rebound.   Sales abroad were particularly strong in the final months of the year as confidence in many foreign nations ran high.  Optimism in the European area, which consumes for nearly two-thirds of Switzerland's goods and services sold abroad, ran at a five year high and sustained the healthy Swiss trade surplus.  Demand for machinery was also facilitated by the strongest pace of manufacturing in 19 months.  The goods and services balance remained in Swiss producer's favor for the fourth quarter averaging $774 million.  Support at home was also present with consumption running at a five month high in the final month of the year.  Retail sales posted seven months of consecutive gains for the longest such string in four years.  This broad-based strength was exactly what SNB Governor Jean-Pierre Roth and other policy officials were looking for when they decided to raise the overnight lending rate at their December 1st meeting.  If growth numbers fall in line with expectations or better, the market will like look to price in a repeat 25 basis point hike at the March 16th meeting as they plan to continue to "normalize" interest rates.

Previous:   Growth in Switzerland's $380 billion economy accelerated to 1.0 percent, its fastest pace in five years, in the third quarter led by continued strength in exports and more active spending habits by Swiss consumers and businesses.  The draw of Swiss goods abroad repeated its role as the foundation upon which growth has emerged.  Switzerland's trade surplus ballooned to SF1.12 billion in September with global demand stoked by the 13 percent decline in the country's currency relative to the benchmark US dollar.  This should be taken with a grain of salt however considering exports only increased 0.1 percent for the quarter against the backdrop of the pervious period's 6.3 percent surge.   Picking up the slack though was a renewed optimism for the domestic consumer and business.  Businesses, flush with profit from sales abroad and a recent record pace in manufacturing activity, looked to turn capital towards expanding their operations through machinery and hiring.   Consequentially, consumers' confidence was fueled by the job market's state and increased spending by 0.5 percent from the second quarter.  Retail sales surged 5.5 and 4.7 percent in July and August respectively.

European Central Bank Interest Rate
Consensus: 2.5%
Previous: 2.5%

Outlook: The European Central Bank will hold a policy setting meeting in Frankfurt on Thursday, March 2, 2006.  It has become increasingly likely that the ECB will use this meeting to initiate a policy of interest rate tightening in the face of European economic expansion.  For some time now, the rate of inflation in Europe has been well above the ECB's target rate of 2.0%, including last year's average price increase of 2.2%.  Employment data across the Euro-Zone serves to amplify the threat of inflation.  In recent months, labor costs per unit of production have been increasing, suggesting that wages have been rising in spite of little or no gain in productivity.  Additionally, consistently high energy prices and rising consumer credit have signaled little relief from continued inflation any time soon.  Furthermore, money supply in the Euro-Zone has been increasing rapidly as a result of historically low interest rates.  Such inflationary pressure combined with the level of growth that is expected across European economies certainly serves as impetus for the Bank to begin raising rates.  In Germany, growth reached a point of stagnation in the fourth quarter of 2005.  However, in the context of more recent surges in consumer and business optimism, the standstill in GDP growth at the end of last year is best characterized as a cyclical blip, and will not deter the ECB from raising rates 25 basis-points to 2.50%.  In fact, economists have already begun pricing in further rate increases towards the middle and end of the year.  If indeed 2006 proves to be a year of policy tightening in Europe, the ECB will be joining a global trend in higher interest rates as the U.S. and Canada continue to pursue stricter policies and Japan shows signs of moving away from its 0.0% rate. 

Richard Lee is a Currency Strategist at FXCM.