After a hefty cut in interest rates and the dollar's plunge to new record lows against a surging euro, investors will closely watch data for clues on how seriously problems in credit markets are affecting the real economy.

An ailing property market and weaker consumer confidence may herald signs that the credit crunch stemming from problems in the subprime mortgage market may be dragging the economy down making more interest rate cuts a near-certainty.

Consumer confidence data on Tuesday is forecast to show a slight fall in August from the previous month while existing home sales are also forecast to be down slightly.

"There's uncertainty in the outlook for risk," said Nicola Chadwick, international economist at Commonwealth Bank of Australia. "The housing and consumer confidence data will be important in gauging how the U.S. economy is faring."

RATE OUTLOOK IN FOCUS

Investors are expecting further rate cuts from the Federal Reserve. A Reuters poll found 12 out of 18 primary bond dealers see a further 25 basis point cut in interest rates from 4.75 percent in October after the half point easing this week.

"I think revision in consensus views on where Fed funds is going will get increasingly lower in the coming few months," said Rob Carnell, economist at ING.

While the U.S. economy is struggling, the European Central Bank is more concerned with controlling inflation with rhetoric from policymakers pointing to the possibility of rising interest rates.

However the euro's strength has led French politicians worried about a tougher environment for exports to urge a more dovish line from the ECB and analysts said this may dim the outlook for further rate rises.

"With the euro pushing through $1.40 you wonder whether they are going to temper their rhetoric slightly, and euro zone data having been a bit softer, you do wonder whether they will hedge their bets a bit more going forward," said ING's Carnell.

European data of note includes the German Ifo business confidence index for September on Tuesday and euro zone August M3 money supply figures on Thursday which many analysts think will continue to come in at elevated levels.

On the inflation front Germany's preliminary September CPI print will be followed by the aggregate euro area flash estimate on Friday.

In Britain investors will look to see how the ongoing saga over Northern Rock plays out. The bank's troubles sparked by turmoil in the credit market have erased the prospect of UK interest rate rises.

European union Inflation