Japanese Machine Orders (SEP) (05:00 GMT; 00:00 EDT)
                          (MoM)                     (YoY)
Consensus:         1.8%                       7.6%
Previous:             6.7%                      -0.5%

Outlook:  Total machinery orders placed with large Japanese manufacturers are expected to rise for the second consecutive month in September by 1.8 percent.  Often used as a leading indicator of business investment, the forecasted improvement would align itself with the third quarter Tankan report released earlier.  According to the business confidence survey, optimism grew to its highest level in two years on a 3 point climb to 24 for the report.  More importantly however, from the component questions, it was revealed that factory heads plan to increase spending by 11.5 percent in the following six months, what would be the fastest pace in 16-years.  The market will look to the September machine order gauge to reflect these expectations and begin a drawn out trend higher.  Promising support for a rise in the machine orders was a preceding rise in the machine tools figure for the same period.  According to the September report, contracts rose 5.4 percent for the second consecutive advance.  If this indicator helps to lay the foundation for strong business investment, firmer employment and economic growth could be in the wings for Japan.

Previous:  Japanese machine orders rebounded less than expected in August.  Just the month before, orders sank 16.7 percent, the biggest largest single decline in nearly 20 years as energy prices and swaying demand left many business leaders doubtful over future revenues.  Following this massive drop, the market had expected a strong rebound as a strong and steady decline in imported crude prices facilitated a return in confidence.  However, instead of the 11.2 percent advanced expected, bookings rose 6.7 percent to 1.08 trillion yen.  From the breakdown, the advance was led by a jump in electronic machinery, but held back by the second drop for automakers.

German Wholesale Price Index (OCT) (07:00 GMT; 02:00 EDT)
                          (MoM)                   (YoY)
Consensus:          0.0%                     3.1%
Previous:              -0.5%                    3.0%

Outlook:  Preceding the initial producer price and final consumer price indices due next week, Fridayââ,¬â"¢s wholesale price gauge is expected to pass through the month of October unchanged.  Such expectations find support in the rebound in the preliminary consumer gauge, which rose 0.2 percent over the same month following two months of contractions.  Downward pressure in prices comes in the form of a pass through in savings from cheaper energy prices.  Allowing for a slight lag from the firmââ,¬â"¢s end, the cheaper input prices may encourage wholesalers to keep prices stable going into the holiday season.  On the other hand, as was seen in CPI, business leaders from the group may also boost prices higher than they would otherwise to acclimate Germanââ,¬â"¢s to the impending VAT tax hike from 16 to 19 percent set for January.   The ECB will monitor this and other German inflation gauges for the effects of the approaching jump in taxes to determine whether further monetary policy tightening will be needed going into the first half of 2007. 

Previous:  Prices at the wholesaler level dropped 0.5 percent in September, as energy costs continued their marked slide in commodities markets.   International crude prices accelerated declines begun in the latter half of August.  Finishing the month nearly 25 percent off of Julyââ,¬â"¢s record high $78.40, the sharp drop in the necessary input was easily passed through to the factory gates.  Another reason for the easing prices was the downward pressure in both business and investor confidence in the region.  With most parties predicting a marked slowdown in economic activity to follow the VAT hike at the beginning of last year, businesses are moving to take advantage of aggressive consumer spending habits ahead of the additional burden.

Richard Lee is a Currency Strategist at FXCM.