German Producer Price Index (JUN) (06:01 GMT; 02:01 EST)
                        (MoM)      (YoY)
Consensus:       0.2%        5.9%
Previous:           0.1%        6.2%

Outlook: Germany producer prices are expecting a modest 0.2% increase in June following May's 0.1% growth.  Annual numbers on the other hand are expected to cool their pace from 6.2% in May to 5.9%, due to faster inflationary pressures in 2005 when producer prices rose 0.5% from May to June.  Should expectations be met, it would be the seventh straight increase, dating back to December of 2005.  Although the monthly numbers seem minimal, the year-over-year increase remains at the high-end of the indicator's historical range, with last month marking a 24-year high.  As has been the theme of the year so far, the cost of energy and the associated rise in dependent prices has kept the indicator on an upward march.  Oil prices in June hovered between $69 and $72.50.  The slight easing should help to keep costs in check, but looking ahead the recent spike above $75 to new highs at $78.40 could be a concern for the European Central Bank.  Pressure is on the bank to raise rates; and with high producer price increases, it is likely that consumer's will be feeling the pressure forcing the bank to act on its "vigilant" promise.

Previous: As noted above, the 0.1% monthly increase hid the significance of the reading, as the 6.2% surge over the year was the fastest pitch in over 24 years.  A major contributing factor was the 13% increase in oil prices from January to May and 19% since the same time in 2005.  Although the month saw slight easing from the previous high established in April, oil rebounded again to establish new all-time highs to put the pressure back on factories.  Responding to these concerns, ECB member Weber said that Europe was seeing inflation "above tolerable levels."  With prices up an average 2.5% the bank has looked to higher lending rates as a means to curb price growth in line with the 2.0% target rate.

US Consumer Price Index (JUN) (12:30 GMT; 08:30 EST)
                       (MoM)        (YoY)
Consensus:      0.2%          4.3%
Previous:          0.4%         4.2%

Outlook:  Upcoming inflation data will provide powerful insight into the next move by the US Federal Reserve Bank.  The bank has been waging a steady war against inflation with 17 straight rate increases from 1.00% to the current 5.25% level.  The bank noted that "inflation expectations remain contained," but that "the high levels of resource utilization and of the prices of energy and other commodities have the potential to sustain inflation pressures."  The short downturn in oil prices (before the recent spike above $78) caused an expected drop of 0.5% in gasoline prices, which have been weighing heavily on consumers.  Of primary concern is the accelerated rate of inflation in the second quarter.  Over the past three years inflation has generally been stronger in the first and third quarters with contractions in the second and fourth quarter.  This year, however, inflation remains high, with 0.6% and 0.4% monthly rises in April and May respectively.  Maintaining a historical perspective in gauging Fed rate hikes, it is interesting to note that current year over year inflation levels (4.3% expected) remain at the lower end of the spectrum for the last 40+ years, excluding a temporary dip at the end of 2003.  Nevertheless, the Federal Reserve Bank remains wary and Bernanke still looks to establish himself in the post-Greenspan era.

Previous: The 0.4% rise in inflation was higher than the forecast for the third consecutive month.  Core inflation, stripping out volatile food & energy components, rose 0.3%; also above expectations for the third straight month.  Prices continue to rise despite the Federal Reserve Board's continued battle against inflation.  The skyrocketing cost of oil and strong rises in commodity prices have been working their way downstream as producers are forced to pass on the bill to consumers in an effort to conserve profit margins.  Most economists note, however, that barring a massive surge in oil to $100 or above, inflation should be containable.  The US economy, while still susceptible to changes in oil price, does not have the same singular focus as it had during the 1970 stagflation crisis.

US Housing Starts (JUN) (12:30 GMT; 08:30 EST)
Consensus:           1898K
Previous:              1957K

Outlook: Housing starts are expected to decline 0.3% to just under 1.9 million in June after May's unexpected rise above the mark.  The housing market, vital to consumer wealth, is off of an all-time high in new starts at 2265K in January and below the 2 million mark considered expansionary for the market.  Expectations for June have been moderated as analysts believe May's report was skewed due to poor weather pushing back the undertaking of many projects until the following month.  The real estate sector, which was booming in recent years, has suffered a period of substantial cooling in the second quarter, down almost 10% from the opening three months of 2006.  Adding to support, historically housing permits tend to be considerably higher than housing starts for the following month, so the 1946K number registered in May suggests new starts could end up very close to the 1898K forecast in groundbreakings.  Additionally, rain and flooding across the Northeast and Mid-Atlantic and concerns of wildfires in the Southwestern US have also played their part in limiting development.

Previous: May housing starts saw a bounce from a 13-month low to 1957K, easing concerns that the housing market could head lower at a pace that could crimp economic expansion beyond central bank expectations.  The monthly numbers indicate that the expected slowdown in the market will likely be gradual, as opposed to a free-fall.  Construction of single-family homes was up 2.1% while multi-family homes shot up 20%, although that number was largely a correction to May's drop.  The Western United States led the advance with a 16% jump in construction, trailed by 8.5% in the Southern portion of the country and only a modest 1.7% increase in the Northeast.  The Midwest saw a considerable decline of 16%.

Richard Lee is a Currency Strategist at FXCM.