German Consumer Price Index (JUN) (June 23)
                         (MoM)         (YoY)
Consensus:         0.1%          2.0%
Previous:             0.2%          1.9%

Outlook: Although energy prices are still high, the volatile swings in petroleum products like gas and crde have settled, allowing for producers and consumers to adjust to rising costs across the board.  As such, the CPI is expected to further moderate slightly even as overall prices remain elevated.  A 0.7% increase in food costs last month looks to have abated somewhat as better weather conditions lessen problems in storage and transport.  Currency market participants will keep a close on how German consumer inflation performs for the month to determine the sustainability of current ECB monetary policy.  The nation represents the largest economy within the zone and therefore has a greater weight in the aggregate measure that holds more prominence in policy makers views.  With interest rates up to 2.75% and ECB members still referring to monetary policy as "overly accommodative," many traders are looking for rates as high as 3.25% by early 2007, even as the German CPI figure remains at the central bank defined target of 2.0%.

Previous:  Germany continued to feel the burden of higher energy prices in May, as a 44% increase in oil since the same period a year ago has so far only been partially offset by a strengthening euro.  Inflation in all major German areas was relatively consistent, with Saxony slightly higher at 0.3% and Brandenburg slightly lower at 0.1%.  Inflation continues on a 2.0% pace, although European-wide inflation is expected to drive ECB rates up past their current 2.75% in the months to come.

US New Home Sales (MAY) (14:00 GMT; 10:00 EST)
Consensus:          1150K
Previous:             1198K

Outlook:  A moderate 3% decline is forecast for US New Home Sales after April's 4.9% gain, which itself followed the volatile start to the year with a double digit decline in February followed by a 12% rise in March.  Affecting the forecast is higher mortgage rates, more unsold homes in the market and weaker prices gains.  Hitting potential homeowners in the wallets, 30-year mortgages are heading above 6.5%, which has effectively tempered the usually strong spring/summer open house season.  House prices have showed signs of leveling out, with the April median price up 0.9% year over year.  New home starts have also sputtered, coming well within the annualized 2.0 million mark considered expansionary for the sector.  The housing market has been a driving force in the US economy and the recent slowdown does not bode well amidst rising inflation and fears of further interest rate hikes from the Fed.

Previous:  US New Home Sales went against forecaster expectations and rose 4.9% month over month even as prices climbed 0.9% and the supply of new homes for sale hit a US record.  However, year over year numbers showed a decline of 5.7% as the housing market continues to produce sings of topping.  Annualized new home sales hit 1.198 million, up from 1.142 million in March.  A temporary dip in long-term interest rates failed to spur new mortgages, which does not bode well as lending rates look to continue their run above the 6.50% percent for 30-year loans. Rates are currently near four-year highs.

Richard Lee is a Currency Strategist at FXCM.