Japanese Machine Orders (MAY) (05:00 GMT, 01:00 EST)
Consensus:  -5.0%
Previous:  10.8%

Outlook: After a sharp and surprising increase in April, Japanese machine orders are expected to slow 5.0%.  However, the drop is expected to be more corrective rather than indicative of a new downtrend.  This is supported by the recent Tankan survey, which showed an increase from 20 to 21 in business sentiment.  Even with industrial production for May down -1.0%, most expect healthy growth and stability in the Japanese industrial markets for the remainder of 2006 as global expansion supplies a healthy stream of demand.  The reading is historically very volatile and large shifts in orders are not unexpected and generally not considered a definitive change for production either way.

Previous:  After dipping -5.2% in March, Japanese machine orders swung strongly positive in April for the highest reading since October 2003ââ,¬â"¢s 17.3% print.  Growth in orders to the tune of 10.8% continues the indicators habit of alternating from negative to positive and back again, which it has done for the first four months in 2006.  This is especially attention grabbing on the back of three consecutive increases at the end of 2005.  The number served as yet another positive indicator for the Japanese economy, with capital spending also up a whopping 13.9% for the same period.

German Trade Balance (euros) (MAY) (06:00 GMT, 02:00 EST)
Consensus:  11.5B  
Previous: 11.2B

Outlook:  Germanyââ,¬â"¢s trade surplus is expected to expand slightly to 11.5 billion euros in May after the previous month's 3.2 billion euros contraction to 11.2 billion euros.  If realized, the balance would be slightly above the six-year average surplus of 10.7 billion euros and it would further remain another testament to the economies strength.  Although domestic demand has been struggling somewhat of late, the export industry has been able to cover for its shortcomings.  Exports for April increased 4.3% against 1.5% expected and -3.3% the month prior, supporting this fact.   Demand for goods destined abroad was also facilitated by industrial production, which similarly increased 4.6% against 4.5% the previous month.  Recently the trade figure has fluctuated in a tight range above 10 billion euros.  An unexpected dip or surge could shake the euroââ,¬â"¢s fixation on hawkish rhetoric from the ECB.

Previous:  German trade fell out of favor in April to a net excess of 11.2 billion euros from 14.4 billion the month before.  Causing the decline was a revised -3.3% dip in export prices, hurting the already strong output levels of the German economy.  Providing little solace for the German books, imports declined only 1.8% during the same period.  Contributing to a hefty portion of the dip were rising energy prices, but while oil and other commodities stabilize the cost of energy is expected to do the same.

Japanese Eco Watchers (Current) (JUN) (07:00 GMT, 03:00 EST)
Consensus:      --
Previous:   51.5

Outlook:  The Japanese Eco Watchers survey has not dipped below 50 in over a year, and a generous heaping of positive data out of Japan recently and a possible end to ZIRP, the confidence survey is not likely to do so anytime soon.  Tokyo CPI was up only 0.3% against 0.4% expected for the month, while retail trade was up 0.6% in May.  Although supermarket sales continue to decline, overall consumers appear to be seeing better conditions, if economic data is any indication.  Japanese business has seen some mixed numbers however, with BSI printing a surprising 1.8 against 7.0 expected, while the Tankan improved to 21 against 20 in May.  The indicator is a good measure of overall Japanese demand and a reading above 50 can serve as further confirmation of the Japanese recovery.

Previous:  The Japanese Eco Watchers survey declined from an all-time high of 57.3 established in March to a much-reduced 51.5.  This sudden shift has put the indicator dangerously close to the neutral-50 read, which it has held above since April of 2005.  May saw declines in perceived conditions across all sectors, with households seeing declining (but still positive) conditions in food, housing and employment.  Overall, manufacturing was slightly less optimistic than services business, suggesting the domestic demand has taken more of the weight of economic growth.

UK Producer Price Index - Input (JUN) (04:30 GMT, 08:30 EST)
                   (MoM)  (YoY)
Consensus:   0.0%  11.5%
Previous:      -0.5%  13.8%

Outlook:  Input prices are expected to remain unchanged following last month's sharp retreat.  Input prices react more quickly have shown more volatile fluctuations than outputs have over the past few quarters as producers have tried to absorb the wild changes in energy and raw material prices, rather than pass them on to an already unstable domestic demand base.  High crude prices continue to be the largest driver of inflation, followed by chemical cost increases, then Food, tobacco & alcohol.  Recent increases in tobacco stocks following a recent US court decision could result in a major shift in this balance in the near future.

Previous:  With oil retreating off of previous highs, producerââ,¬â"¢s input prices in the United Kingdom fell in June.  Before taking off again in early July commodities had appeared ready to stabilize despite continued geo-political uncertainty and the beginning of the hurricane season in the United States.  The decline produced a large gap between prices received and paid by firms suggesting they were able to recoup some of the losses incurred over the past few months when the disparity was firmly against them.

UK Producer Price Index - Output (JUN) (04:30 GMT, 08:30 EST)
                  (MoM)  (YoY)
Consensus:  0.2%  2.7%
Previous:      0.3%  2.4%

Outlook:  Producers continue to shift increases in production costs onto consumers, albeit at a reserved pace, which has been a cause for some economists to speculate inflation will be slowly buffeted rather than what is needed to finally rouse the Bank of England to consider a shift in interest rates.  PPI Output is expected to increase 0.2% despite last month's 0.5% drop in inputs, revealing a firm commitment by firms to conserve revenue through the fiscal year.  Producers are still adjusting to higher energy and commodity prices, which have only recently shown some signs of stabilization, but are easing concerns significantly.

Previous:  Producer outputs began their more marked shift in moving costs onto consumers, with an average 0.3% increase in prices received from consumer in May.  Output prices tend to lag input prices in response to primary inflation pressures.  Overall, the increase in prices charged by producers had the effect of increasing inflation in the consumer basket, however, the level of price growth in all the BoEââ,¬â"¢s commonly reviewed measures is still well below the level required to justify any kind of increase to interest rates.

Richard Lee is a Currency Strategist at FXCM.