US PPI & RETAIL SALES DATA DOWN

US headline PPI fell by a massive 1.6 pct in October, marking the biggest fall in five years and much sharper than the 0.5 pct decline analysts had expected. The core PPI rate meanwhile, which strips out energy and food prices, also fell by 0.9 pct, the largest decline in over 13 years and well below the modest 0.1 pct rise expected by analysts.

This couple of figures clearly states that Thursdays Consumer Price Index will also come below the expectation and it'll lead the further Dollar weakness. And dampening the Federal Reserve's fears over rising inflationary pressures and increasing the chances of a US rate cut early next year.

A huge drop in core PPI has got the market thinking that the Fed is done with raising interest rates. Along with this one the Retail Sales data also weighed on the dollar. Although the data showed sales fell by 0.2 pct in October, slightly less than expected, sharp downward revisions to September to give a decline of 0.8 pct mean retail sales may weigh on US GDP, analysts said.

For the euro the news helped offset earlier data showing weaker-than-expected euro zone GDP growth during the third quarter, as well as a disappointing ZEW survey of German economic expectations which fell to a 13-year low in October.

Even we saw the UK's Inflation data below expectation which showed the key annual CPI rate stayed at 2.4 pct in October against expectations for a rise to 2.6 pct -- diminished market expectations that the Bank of England will raise the cost of borrowing again next year. The key event in the UK, however, will come tomorrow when the Bank of England presents its latest forecasts for growth and inflation in its quarterly inflation report.