Japanese Industrial Production (JUN P) (23:50 GMT; 19:50 EST)
                           (MoM)           (YoY)
Consensus:          1.3%             4.2%
Previous:            -1.3%             3.9%

Outlook: Japanese Industrial Production looks to post a modest recovery in June despite recent weakness in consumer spending. Shoppers showed a pronounced decrease in confidence and drove down department store sales, as speculation began to mount that the Bank of Japan would raise interest rates at the end of the month. Consumers and manufacturers alike also suffered as high oil prices contributed to a 2.2 percent fall in household spending and drove auto sales down by 6.5 percent, continuing that industry's year-long decline. Despite these ominous numbers, there are bright spots in the Japanese economy that will likely prove capable of buoying production. Most obvious is machine tool orders, which have shown steady increases and rose in June by 11 percent on the year. This materially strong trend in capital investment suggests that Japanese industry will boost production after seeing its capacity utilization fall 3 percent in May.

Previous: Industrial production fell by 1.3 percent in May after appreciating by a record-high 5 percent in April. Despite the greater than expected decline, analysts emphasized that this decline was only a temporary retracement, rather than the beginning of a downward trend. Indeed, all available numbers appeared to indicate that industrial production is quite healthy. A weaker national currency increased demand for exports, which gained an impressive 11.5 percent on the previous year's result.  The industrial sector subsequently experienced a breakthrough month, with machine tool orders increasing a record 15.3 percent on a yearly basis.

Australian TD Securities Inflation (JUL) (00:00 GMT; 20:00 EST)
                           (MoM)           (YoY)
Consensus:          n/a               n/a
Previous:             0.1%            2.9%

Outlook: Government reports of 4.0 percent annualized inflation give reason to suspect that the TD Securities July survey will show prices on a continued rising trend. Continued risks to heightened price growth include oil prices at fresh record-highs through July, leaving little doubt that the Reserve Bank of Australia will raise lending rates in the near future. Arguably, the only short-term downside risk to inflationary pressures remains food prices, which will likely begin to drop as the nation's farmers recover from the cyclone that decimated crops in March.

Previous: Australian inflation eased last month, gaining only 0.1% from the month before. Despite this fairly positive news, analysts warned that this seemed only a temporary reprieve from the higher numbers seen in the two previous reports. Most of the growth in prices came in the form of higher gasoline prices, consistent with oil prices that remained above $70 a barrel, although food prices continued to rise, especially for fruits and vegetables. Softer retail demand may also have contributed to the lower inflation level, with the Reserve Bank of Australia reporting slowing sales growth in June.

German Retail Sales (JUN) (04:00 GMT; 02:00 EST)
                            (MoM)         (YoY)
Consensus:           1.0%           0.7%
Previous:            -0.4%            1.9%

Outlook: Retail sales look to rebound after declining in May, but a strong result in June 2005 will likely leave the yearly growth materially lower at 0.7 percent.  There is viable room for a surprise, however, as a significant amount of positive data has come since the last release.  To start, both the services and manufacturing PMI surveys reflected impressive optimism.  The Services component surprised analysts who forecasted a 57.3 reading, jumping instead to 61.0 on the month.  Factory orders also showed major gains, coming in at 17.3 percent year on year.  Risk to the downside lies within the ZEW and IFO surveys, which both expressed pessimism on the near future.  The GfK consumer confidence remained on the rise, however, propelled by falling unemployment.  Other possible leading indicators provide a solid showing in retail.  For one, European equity indices, which in theory are priced according to future earnings, are among the best global performers this year.  There is also speculation that households in Germany may spend more in coming months to avoid a higher value-added tax next year.  Even though rates are still relatively low, however, all of these signs of European acceleration may prompt the ECB to raise rates at a faster pace, which could in turn put an end to all of the drama.

Previous: German retail sales declined by 0.4 percent in May, which was more recently discovered on an improved revision.  The original release showed a 2.2 percent decline-the worst monthly move in two years.  On a yearly basis, however, retail sales grew by 1.9 percent, boosted by the hosting of the 2006 World Cup.  The annual growth was well received, seeing the prior two months posted 1.0 percent declines.  As business spending has been picking up in the Euro-Zone, we are noticing a trend of lower unemployment and improved retail.  The numbers will have to get a bit stronger however, as world growth may soon depend on these consumers should the US economy run out of steam.

Chicago Purchasing Managers Survey (JUL) (14:00 GMT; 10:00 EST)
Consensus:            55.9
Previous:               56.5

Outlook: Analysts expect July's Chicago PMI Survey to reflect decreased optimism on soaring input prices, as heightened energy, raw material and borrowing costs weigh on economic activity.  If median estimates are correct, a reading of 55.9 will be the second straight drop and the lowest reading in five months.  Yet there is some hope for a turnaround in Chicago.  On Tuesday we saw a jump to 12 in the Richmond Index when predicted to rise one point to 5.  Durable Goods Orders were also a pleasant surprise at a 3.1 percent expansion in June, when only 2.0 percent was expected.  If Monday's number is consistent with the Beige Book, which noted obvious signs of a slowdown, the Fed will have its toughest decision in Bernanke's brief tenure.  Fed-Funds Futures have been rapidly declining and now indicate a mere 25 percent expectation that the Fed will raise on August 8th, following Friday morning's GDP release.

Previous: The previous PMI showed that business growth Chicago area contracted in June.  Primarily blamed on the highest prices in raw materials since July of 1988, the index fell to 56.5 from 61.5 in May, which was 2006's highest reading.  In fact, the index of prices paid for raw materials rose to 89 in June from the previous 76.9.  The report falls along the lines of the major trend in the United States, that is, higher commodity costs are propelling inflation which in turn is hurting consumer spending.  Manufacturing currently makes up approximately twelve percent of the US economy, and growth will be crucial in respect to chipping away at a behemoth trade deficit in the world's largest economy.

Richard Lee is a Currency Strategist at FXCM.