UK Gross Domestic Product (Q4 A) (09:30 GMT; 04:30 EDT)
                           (QoQ)                     (YoY)
Consensus:           0.7%                      2.9%
Previous:               0.7%                      2.9%

Outlook: UK GDP is expected to increase by 2.9% for the second straight month, the highest pace of growth in two years. Strong numbers for the year’s last quarter were led by services and consumer spending. Services expanded by the fastest pace in a decade, accounting for three quarters of the economy. Retail sales grew by a yearly high of 1.1% in December, and housing prices continued to rise, offsetting any lack of consumer spending in other sectors of the economy. Manufacturing retreated from its all time high of 55.1 in June to 51.9 in December, however, Industrial production rallied to 0.5 towards the end of the year, the highest value since March. A strong pace of growth for the fourth quarter will prompt the Bank of England to pay closer yet attention to inflation, perhaps yielding another rate hike to cool the economy.

Previous: Third quarter GDP for the UK rose by 2.9%, 0.2% greater than predicted, and 0.2% greater than the previous quarter. The unexpected growth was powered by manufacturing, a boost in financial services and climbing housing prices. The UK’s fast pace of growth and rising inflation prompted the Bank of England to raise interest rates to 5.0% in November, the second hike in 2006 since August, and again earlier this month to 5.25%.

Reserve Bank of New Zealand Rate Decision (20:00 GMT; 15:00 EDT)
Consensus:          7.25%
Previous:               7.25%

Outlook: The RBNZ monetary policy group is expected to pass on a shift yet again at the conclusion of its two day-meeting. What’s more, a growing number of market participants and economists are expecting a new dovish tinge to show up in the comments that follow the actual decision. Since the December meeting, a few indicators have weakened the case for the possible rate hike RBNZ Governor Alan Bollard has talked warned of since raising the overnight lending rate to its current record high. In the past month, economic activity numbers have worsened. Looking at the whole picture, growth in the third quarter slowed more than expected to a 0.3 percent clip. For the year, that marks a reserved 1.4 percent pace, the worst performance from the island nation’s economy in seven years. Honing in on a few of the more pertinent sectors of the economy, the picture is blurred.

From the business group, third quarter manufacturing activity slowed significantly on rising energy prices and waning export demand. On the other hand, a recent read on fourth quarter business confidence has shown significant improvement as optimists finally outnumber the long-standing pessimists. Numbers from the consumer sector is more conducive to an eventual rate cut. Spending has finally shown signs of slowing after retail sales marked their first contraction in seven months in November. At the same time though, consumer confidence has rallied to its highest level in six years, suggesting consumers may end up controlling their own spending habits. The single most influential indicator from the sea of data may be the consumer price index. In the fourth quarter, the CPI read fell 0.2 percent for the first contraction in nearly 6 years. In turn, the annual figure has fallen within the central bank’s 1 to 3 percent target rate for the first time in 18 months.

Japanese Merchandise Trade Balance (Yen) (DEC) (13:50 GMT; 18:50 EDT)
Consensus:          1,194.7 Billion 
Previous:                  911.3 Billion

Outlook: The Japanese Merchandise Trade Balance likely moved to its highest in over two years, as a quickly falling currency boosted the competitiveness of domestically produced goods. Indeed, with the Yen at multi-year lows against a number of different major counterparts, it is little wonder that exports would continue their strong pace. Of equal significance, the falling purchasing power of the Yen only compounded the effects of tepid consumer demand—leaving imports at a much slower rate of growth. Though a strong trade balance figure undoubtedly bodes well for economic growth, it will perhaps be more significant to review the political implications of seemingly unflappable exports. A growing trade surplus will only increase pressures on Japanese officials to allow for substantial appreciation of the Yen—a seemingly essential condition for any worthwhile Yen retracement.

Previous: The Japanese merchandise trade balance grew to its best since September, as strong international demand underpinned domestic production.  Exports grew an impressive 12.1 percent, while imports gained a smaller 7.5 percent. The clearest support for overall trade remained the Japanese currency, which has floundered to its lowest levels since 1998 against a number of currencies. Moving forward, markets will watch the overall trade balance growth to gauge the likelihood of a politically motivated strengthening of the Yen.

John Kicklighter is a Currency Strategist at FXCM.