* USD falls amid economic data dump before long weekend

* Stocks, bond yields decline, Trump tariffs remain in focus

* The Fed’s favoured inflation measure sped up in October, initial claims lower

* JP Morgan turns positive on US stocks, sees S&P 500 advancing in 2025

FX: USD dropped the most since late August. The index broke down through the prior year-to-date high from April at 106.51, which is now resistance again. There was mixed US data with lower initial jobless claims falling to seven-month low, while the Fed’s preferred inflation gauge hit estimates. The chances of a 25bps December Fed rate cut edged higher to 66% from 60%. The 50-day SMA is at 105.66. Month-end rebalancing points to dollar selling due to the monthly outperformance of the S&P 500 relative to other global stock indices.

EUR performed well hitting the highest in a week. The US Thanksgiving break probably saw some profit taking in the dollar before the holiday period. We had hawkish chatter from a known ECB hawk, talking about needing to be cautious about cutting rates as policy nears neutral. Near-term resistance may come at 1.06.  

GBP made the top three performers on the day behind the kiwi and yen. The BoE’s Lombardelli repeated her caution on the policy outlook and wanted to see more evidence of disinflation. The bank is priced to pause in December with a strong chance of a rate cut in February. The 61.8% Fib retracement level from the April move higher sits at 1.2729.  

USD/JPY dropped to a five-week low. The yen was the top performing major currency as Treasury yields edged down.

AUD printed an inside day trading just below 0.65. The NZD was the second best major performer. The RBNZ cut its policy rate 50bps to 4.25% as expected. But it signalled that rates may not fall as far as market pricing currently predicts. USD/CAD traded little changed as markets mulled over the tariff threat.

US Stocks closed in the red heading into Thanksgiving. The S&P 500 settled 0.38% lower at 5,999. The tech-dominated Nasdaq 100 lost 0.85% to finish at 20,744. The Dow closed down 0.31% at 42,722. There was notable underperformance in the Nasdaq after a slew of tech/software earnings from Dell, HP and Workday stumbled after earnings. The former plunged 12% after it reported weaker than expected revenue and offered conservative guidance.

Asian stocks: Futures are mixed. Asian equities were again mixed as well with concerns around Trump’s tariff threat offset by Wall Street’s record highs. The ASX 200 traded in the green on strength in gold, tech and financial stocks. Monthly CPI printed softer than expected. The Nikkei 225 was downbeat on the firmer yen and markets leaning towards a BoJ rate hike next month. The Hang Seng and Shanghai Composite were positive, but gains were capped by a lack of major new catalysts.

Gold endeavoured to move north towards the 50-day and 100-day SMAs around $2661/7. But the upside was limited and prices closed only marginally higher. The next level of support is at $2594 which is the 38.2% Fib level of the May to October bull move.

Day Ahead – Japanese CPI

Japan inflation data is likely to follow the preceding Tokyo CPI release. That saw core CPI print above consensus though still down from the prior month. The yen had depreciated by almost 4.5% against the dollar over November. That raised the possibility of higher import costs and a subsequent overshooting of inflation. Of course, more recently the currency has strengthened.

A December rate hike from the BoJ is probable with inflationary pressures still evident. The changing political picture is also likely to see a big fiscal stimulus deal which encourages the view of a rate hike soon. The next BoJ announcement is scheduled for December 19th.

 Chart of the Day – USD/JPY moving lower

Looser fiscal policy and tighter monetary policy is typically a supportive mix for a currency. There is around 16bps priced into the BoJ meeting next month. The yen strengthened considerably yesterday with USD/JPY moving south by 1.33%. Yesterday, prices slid through the halfway mark of the July to September drop at 150.76 and close to the 100-day SMA at 150.39. The next major Fib level is at 148.12.