Swiss Unemployment (JAN) (06:45 GMT; 01:45 EST)
                    (Rate)   (s.a.)
Consensus:   3.3%    3.1%
Previous:       3.3%    3.1%

Outlook: Swiss unemployment is expected to have passed unchanged at 3.3 percent last month. As indicator after indicator issued from the nation’s economic calendar turns lower, the readiness of domestic demand to take the reins for economic growth becomes increasingly important. Looking to available data that may give a clue to more current labor trends, the outlook is starting to cloud. The employment component in the SVME PMI indicator for the same month reported a second consecutive drop. Furthermore, the steady decline in the nation’s trade surplus may be point to further trouble for those looking to find factory jobs. In December, the Swiss international trade account slipped to SFr 0.43 billion, the third straight contraction and well off of the highs seen only months before. One questionable source of optimism was the ZEW investor confidence indicator, which rose from -23.7 to -10.8 in January. On the other hand, this indicator has limited historical data available and its reliance is as yet untested. Going forward, employment in export-based industries (and perhaps more generally for the entire Swiss economy) may hinge on the ability of the German consumer to weather the VAT tax hike.

Previous: According to the State Secretariat for Economic Affairs, there were 1.461 fewer unemployed Swiss in December, leaving the jobless rate at 3.3 percent. With this final month of data, labor trends have capped a very strong year. The number of unemployed people in the labor pool through 2006 averaged 131,532, an 11 percent drop from the year before. The high level of employment is a very public consequence of GDP at its highest levels in nearly six years. However, this same correlation could spell the turn in employment. According to the SNB’s latest predictions, growth in 2007 will likely slow to a 2.0 percent annual pace from nearly 3.0 percent last year. It remains to be seen, however, when the momentum behind domestic growth will finally recede from employment figures. Manufacturing and sentiment readings have already reported their own turns; and the dimming prospect of revenue will surely filter through sooner or later.

German Industrial Production (DEC) (09:30 GMT; 04:30 EST)
                  (MoM)   (YoY)
Consensus:  0.5%    6.3%
Previous:      1.8%    6.0%

Outlook: German industrial production is expected to have declined in December on faltering demand for consumer goods. The most promising clue to activity for the month is the recently released Factory Orders report. Bookings unexpectedly dropped 0.2 percent, setting the impetus for a slowdown and shifting the burden to inventories. Recently foreign demand has suffered on the global market as the Euro has appreciated 0.8 percent against the dollar. On the home front, demand within the EU region and Germany is expected to dampen as momentum within the economy is stutter. Domestically, concerns over higher taxes have led to caution in consumer and business confidence levels. With speculation over a follow up European Central Bank rate hike as early as March, continued declines for manufacturing could put hawkish monetary plans in jeopardy.

Previous: Industrial production in the world’s third largest economy accelerated to its fastest pace in seven months, helping the German economy to ramp up to its fastest pace in six years. In November production jumped 1.8 percent, beating out economist forecasts of 1.0 percent. Underpinning the growth in output was the high level of foreign demand, which helped facilitate a 25.2 billion euro surplus for the month of November. Gains within exports are expected to help alleviate forthcoming pressures of a possible slowdown in domestic spending brought on by rising taxes and healthcare costs. As German consumers prepare to close the purse strings, German manufacturers will have to rely on the volatile and dubious foreign market.

UK Industrial Production (DEC) (9:30GMT; 4:30EST)
                  (MoM)  (YoY)
Consensus:   0.1%  0.6%
Previous:       0.5%  0.8%

Outlook: UK industrial production is expected to grow 0.1 percent in December, leading the annual rate marginally lower to 0.6 percent. The fragile sector will be getting no help from exchange rates, as the British Pound surged to 14-year highs during the month, making products out of the UK significantly more expensive abroad. Nevertheless, robust growth in the Euro-zone, which purchases more than half of the UK’s exports, should continue to fuel the manufacturing sector and contribute to broader economic growth as well. However, the Office for National Statistics in London said last month that a flat reading for December and no revisions to previous data would mean that industrial production would detract from growth in the fourth quarter, leaving the services sector to be the primary driver of UK economic expansion.

Previous: Industrial output in the UK gained 0.5 percent during the month of November, led by a rebound in manufacturing production, which rose of the first time in three months. The figures suggested that the fragile manufacturing sector was on track for a fourth quarter of expansion, helping to support economic growth fueled by the services sector and the housing market. Additionally, stronger demand from the Euro-zone led companies to produce more, as exports to 13-member area, which buys over half of UK-produced goods sold overseas, rose 2 percent in November. With the expansion in the Euro-zone expected to continue through the end of 2006, the industrial and manufacturing sectors should improve further.

New Zealand Unemployment (4Q) (GMT; EST)
Consensus: 3.8%
Previous: 3.8%

Outlook: Economists predict that the New Zealand economy added jobs through year-end 2006, as a Q3 decline left room for a modest rebound. Though forecasts of 3.8 percent unemployment are still above Q2 record-lows of 3.6 percent, strength in employment remains one of the primary drivers of domestic economic growth. As such, it is very important that tomorrow’s figures impress, with any disappointments to undoubtedly lead the New Zealand dollar lower in its wake. The central bank has maintained a continued hawkish bias on monetary policy, as a robust labor market has sparked a seemingly unflappable uptrend in consumer spending—leaving inflation above target through 2006.

Previous: The New Zealand economy shed jobs through the third quarter of the year, leading unemployment higher and disappointing forecasts of continued strength. Weakness in labor did not have a noteworthy effect on domestic consumption, however, with Retail Spending figures continuing higher through the final quarter. A recent drop leaves fears that consumption growth may have peaked, however, making tomorrow’s labor report essential to future economic expansion. Risks arguably remain to the downside for the New Zealand dollar, with predictions of fourth quarter employment gains leaving ample room for disappointment.

John Kicklighter is a Currency Strategist at FXCM.