Closing Recap 

U.S. stocks rallied for a third straight day on Tuesday, though the major indices finished well off their highs in a choppy session. The market was driven by a fresh wave of dovish economic data, including softer-than-expected retail sales and producer inflation for September, which solidified market expectations for a December interest rate cut from the Federal Reserve. Small caps were the standout performers, with the Russell 2000 surging over 2%, but a late-day slump in mega-cap tech stocks weighed on the S&P 500 and Nasdaq. 

The U.S. dollar fell to a one-week low as rate cut bets climbed, pushing Treasury yields down to their lowest levels of the year. Gold soared on the dovish data, settling above $4,140 an ounce. In contrast, crude oil prices slumped nearly 1.5% as hopes for a Russia-Ukraine peace deal and fears of a supply glut weighed on the market. 

Key Takeaways 

• Stocks Rally for 3rd Day, Small Caps Lead: The market extended its winning streak, with the Russell 2000’s 2.14% surge signaling broadening participation beyond mega-cap tech. 
• Dovish Data Cements Rate Cut Bets: Softer-than-expected September Retail Sales and Producer Price Index (PPI) data sent the probability of a December Fed rate cut soaring to 84%. 
• Dollar and Yields Tumble: The U.S. Dollar Index fell to a one-week low and the 10-year Treasury yield dropped to 4.0%, matching its year-to-date low, as the market priced in a more dovish Fed.
• Thanksgiving Week Seasonality in Play: Today’s price action is aligning with historical Thanksgiving week patterns, which typically see a weaker U.S. dollar and strength in EUR/USD and Gold on the Tuesday before the holiday. 
• Traders on Alert for BoJ “Thanksgiving Trap”: With U.S. liquidity set to dry up for the Thanksgiving holiday, traders are on high alert for a potential surprise intervention from the Bank of Japan to strengthen the yen in thin market conditions.
• Yen Finds a Bid as BoJ Signals a Hike is Coming: The Japanese Yen is gaining ground, with USD/JPY pulling back, after a Reuters report signaled the Bank of Japan is intentionally shifting its messaging to prepare the market for a near-term rate hike, possibly in December.
• Gold Surges Past $4,140: The precious metal gained over 1.1% as a weaker dollar and falling yields provided a powerful tailwind for the non-yielding asset. 
• Oil Slips on Peace Hopes and Supply Glut Fears: WTI crude fell 1.5% to below $58 a barrel as progress on Russia-Ukraine peace talks and forecasts of a 2026 supply glut weighed on prices. 
• Bitcoin Stabilizes, But Sentiment Remains Fearful: The crypto market is attempting to find a floor after last week’s brutal sell-off, with Bitcoin showing signs of stabilizing, though sentiment remains in “Extreme Fear.” 
• Aussie and Kiwi Dollars Rally on Hawkish Central Bank Surprises: The AUD surged after hot inflation data killed rate-cut hopes, while the NZD rallied after the RBNZ signaled an end to its easing cycle. 

Market Overview

The market’s dovish pivot is in full swing. The market’s tug-of-war between bullish momentum and underlying anxieties continued on Tuesday, but the bulls ultimately won the day. Tuesday’s trading was a clear continuation of the trend that began late last week, as another batch of softer-than-expected U.S. economic data fueled a powerful rally in risk assets. The delayed September retail sales and producer price reports both pointed to a cooling economy and stabilizing inflation, giving the Federal Reserve a clear green light to cut interest rates again in December. The market is now pricing in an 84% probability of a cut, a dramatic repricing that has sent the U.S. dollar and Treasury yields tumbling. This “bad news is good news” dynamic was on full display, with the market shrugging off signs of a slowing consumer to focus on the prospect of easier monetary policy. 

Index	Up/Down	%	Last
DJ Industrials	664.12	0.0143	47112
S&P 500	60.76	0.0091	6765
Nasdaq	153.59	0.0067	23025
Russell 2000	51.7	0.0214	2465

The most encouraging aspect of the rally was the strong performance of small-cap stocks, a sign that the market’s breadth is improving and the rally is expanding beyond the handful of mega-cap tech names that have driven performance for much of the year. Indeed, while the Nasdaq was weighed down by some profit-taking in the afternoon, eight of the eleven S&P sectors finished in the green. With bullish calls from major banks like Deutsche Bank and JPMorgan growing louder, and with the market entering a historically strong seasonal period, the stage appears set for a potential year-end “Santa Claus Rally,” provided the upcoming data continues to cooperate.

Economic Calendar 

With the U.S. government back online, the market is beginning to receive the backlog of delayed economic data. Today’s focus will be on the UK Autumn Budget and U.S. Jobless Claims. Data Released Yesterday / Overnight: 

• U.S. Retail Sales (Sep): Rose a weaker-than-expected +0.2% m/m, with the control group declining -0.1%, signaling more cautious consumer spending. 
• U.S. Producer Price Index (Sep): Core PPI eased to +2.6% y/y from +2.9%, undershooting forecasts and pointing to stabilizing inflation. 
• U.S. Consumer Confidence (Nov): Plunged to 88.7 from 95.5, a sharp deterioration in household sentiment. 
• Australian CPI (Oct): A major upside surprise, with headline inflation accelerating to 3.8% y/y, extinguishing hopes of any near-term RBA rate cuts. 
• RBNZ Rate Decision: Cut its cash rate by 25bps as expected but signaled the easing cycle is effectively over, a hawkish surprise that sent the NZD soaring. 

Today’s Economic Calendar: 

• European Session: The main event is the UK Autumn Budget announcement. The details of Chancellor Reeves’ fiscal plans will be crucial for the pound and UK gilts. 
• U.S. Session: The key release is the weekly U.S. Jobless Claims, which has been brought forward due to the Thanksgiving holiday. 
• 13:30 GMT – U.S. Weekly Jobless Claims (Exp: 225K).
• Reminder: This is a holiday-shortened week in the U.S., with markets closed Thursday for Thanksgiving.

Asset Class Spotlight: FX, Commodities, Bonds & Crypto

Gold prices soared on the back of dovish U.S. data, with December futures settling up 1.12% at $4,140 an ounce. A weaker dollar and tumbling Treasury yields provided the perfect cocktail for the yellow metal, and the move was further supported by a strong historical seasonal bias for gold on the Tuesday before Thanksgiving. In contrast, crude oil prices fell, with WTI settling down 1.51% at $57.95 a barrel. Progress on Russia-Ukraine peace talks, combined with multiple forecasts pointing to a 2026 supply glut, is weighing heavily on the market. 

Asset	Up/Down	Unit / % Change	Last
WTI Crude	-0.89	-0.0151	57.95
Gold	45.8	0.0112	4140
EUR/USD	0.0057	0.0049	1.1577
USD/JPY	-0.97	-0.0062	155.92
Bitcoin	(Stable)	–	87500
10-Year Note Yield	-0.03	-0.0074	0.04

The U.S. dollar weakened against all major currencies as dovish data sent rate cut bets soaring. As the U.S. heads into the Thanksgiving holiday, traders are on high alert for a potential “Thanksgiving Trap” from the Bank of Japan. Historically, Japanese authorities have used the thin liquidity of U.S. holiday periods to intervene and strengthen the yen, as it requires less capital to move the market. With intervention threats already escalating, the risk of a sudden, sharp drop in USD/JPY is elevated from Wednesday evening through Friday. 

• EUR/USD: The pair extended its winning streak to a third day, trading firmly around 1.1580. The single currency is benefiting from the broad-based weakness in the U.S. dollar, aligning with its strong seasonal tendency for the Tuesday before Thanksgiving. Large options expiries today near the 1.1600 level ($3.0B total) could act as a magnet and resistance zone.
• GBP/USD: The pound rallied to near 1.3200 ahead of the Autumn Budget. While dovish BoE expectations remain a headwind, the sharp decline in the U.S. dollar is providing a significant tailwind for the cable. 
• USD/JPY: The yen found some bids as expectations of a near-term BoJ rate hike grew, pushing the pair lower. The hawkish shift in communication from the BoJ is providing some much-needed relief for the beleaguered currency.
• AUD/USD & NZD/USD: The Aussie and Kiwi dollars were the biggest winners, both rallying sharply after hotter-than-expected inflation in Australia and a hawkish rate cut from the RBNZ forced a dramatic repricing of policy expectations. A large $1.3B options expiry at the 0.6500 level for AUD/USD provides a key target.

Cryptocurrencies:The crypto market is seeing a relief bounce, with Bitcoin recovering from its “death cross” lows to trade near $87,500. After a week of brutal selling, the crypto market is showing signs of stabilizing. Bitcoin is holding its ground around the $87,500 level, finding some relief from the broader improvement in risk sentiment. However, with the Fear & Greed Index still in “Extreme Fear,” the recovery remains tentative. U.S. Treasury yields tumbled as investors piled into government bonds, confident that the Fed is on track to cut rates in December. The benchmark 10-year yield fell 3 basis points to 4.0%, matching its lowest level of the year. 

Looking Ahead 

Today’s trading will be dominated by the UK Autumn Budget and the U.S. Jobless Claims report. With the U.S. markets closed for Thanksgiving tomorrow and a half-day session on Friday, liquidity is expected to dry up, which could lead to increased volatility. The “Thanksgiving Trap” for the Japanese yen remains a key risk that traders must monitor closely. Any surprise moves from the Bank of Japan could lead to outsized moves in an otherwise quiet holiday market.

What to Watch

• The Dovish Repricing: The market has aggressively repriced a December Fed cut back to an 84% probability. This is now the primary driver of market sentiment. Today’s jobless claims data will be critical in confirming or denying this dovish narrative. 
• The BoJ’s Hawkish Shift: The Reuters report signaling a potential December BoJ rate hike is a major new development. This is a significant tailwind for the Yen and a potential headwind for the popular Yen-funded carry trades. 
• The UK Autumn Budget: The UK budget announcement is a major event for the Pound. With the market already pricing in an 80% chance of a December BoE rate cut, any signs of fiscal tightening from Chancellor Reeves could add to the bearish pressure on Sterling. 
• The Thanksgiving Trap in USD/JPY: Be aware of historical patterns. The Thanksgiving holiday week is notorious for low-liquidity moves, and Japanese authorities have a history of using this period to intervene in the currency market. The risk of a “flash crash” in USD/JPY from Wednesday night through Friday is significantly elevated.
• Thanksgiving Seasonality: Traders should be aware of the historical patterns in play this week: a weak U.S. dollar, a strong Euro, and specific bullish days for Gold (today and Friday). These seasonal tailwinds are currently aligning with the fundamental narrative.