European and global markets are moving into a quieter phase on Thursday as the U.S. Thanksgiving holiday slows trading. During the lull, the dollar continued drifting lower, heading toward its largest weekly drop in at least four months. With short-term drivers paused, investor attention is already shifting toward the outlook for 2026.
While the U.S. appears to be preparing for more rate cuts, several other major economies are now moving in the opposite direction. South Korea became the latest to signal a hawkish shift, dropping its easing bias and pushing domestic bond yields sharply higher.
In Japan, former Bank of Japan dove Asahi Noguchi adopted a more hawkish tone in a speech in Kyushu, calling for gradual rate hikes. His remarks aligned with the more assertive stance shown recently by other BOJ policymakers.
The Reserve Bank of New Zealand also signaled an end to its easing cycle during this week’s meeting. The New Zealand dollar continued to climb on Thursday and is now up nearly 2% since the policy announcement.
Later in the day, markets will receive minutes from the European Central Bank’s October meeting, where rates were left unchanged. Investors will also watch new confidence data across Europe, while commodity markets follow developments related to the potential Ukraine peace framework. Russia has dismissed the idea of major concessions, following the leak of a call between a Kremlin aide and U.S. envoy Steve Witkoff.
At the global level, markets still expect around 90 basis points of rate cuts in the U.S. between now and the end of 2026. By contrast, traders are pricing in 75 basis points of hikes in Japan and 40 basis points in New Zealand. The dollar index has slipped about 1% from last week’s six-month high.
Although interest rates remain significantly lower in Japan and New Zealand than in the U.S., currency markets tend to look forward. Investors often respond more to the direction of policy rather than the current level.
Attention has also turned to the Australian dollar. A hotter-than-expected inflation reading pushed Australia’s 3-year and 10-year yields to their highest levels in the G10. Even so, the Aussie has stayed within a narrow trading range for the past 18 months. A stronger move in the Chinese yuan, which it closely tracks, could be the catalyst needed to break higher.
U.S. stock and bond markets are closed on Thursday and will reopen for a shortened session on Friday.
Key Events to Watch Today
- U.S. Thanksgiving holiday
- Euro zone consumer confidence data
- ECB meeting minutes
