Most major currency pairs are caught in tight trading ranges as traders brace for minutes from the Federal Reserve’s last meeting and liquidity ebbs ahead of the US Thanksgiving holiday. The dollar is modestly weaker, and Treasury yields are holding steady.

The euro is trading on a slightly stronger footing after sentiment data turned higher, mitigating fears of an even sharper downturn. S&P Global’s Composite Purchasing Managers’ Index climbed to 47.8 from 47.3 in October – still below the 50 threshold separating contraction from expansion, but indicative of an improvement in confidence as the bloc grapples with a historic energy shock. A similar survey covering Germany also showed improvement, suggesting that an incoming recession could prove more shallow than initially suspected.

The pound is higher after the Supreme Court said the UK government would need to approve another referendum on Scottish independence, frustrating efforts to run a consultative poll next year. The decision should reduce the likelihood of a breakaway vote until well after the 2024 general election, allowing the Sunak administration to focus on other priorities.

Oil prices are lower ahead of an expected decision from the European Union and the Group of Seven industrialized nations to implement a cap on Russian oil prices. Under the plan, insurance, financing, and transportation services would be prohibited for shipments that are sold for more than the allowable limit – a move that is designed to impose a cost on Russia, while ensuring that world markets remain well supplied. The jury is out on whether this will have any effect on President Putin’s behaviour. We suspect not.

In a warning for other jurisdictions with overheated housing markets, the Reserve Bank of New Zealand raised rates by 75 basis points last night, citing still-hot labour markets as making tighter policy necessary – even as it forecast a 20 percent decline in home prices and a recession hitting next year. The kiwi spiked higher on the decision.

A slew of data releases should keep traders awake over the next few hours. Durable goods orders for October are seen rising 0.5 percent month-over-month, but could look much weaker when aircraft, transportation, and defence categories are excluded. Jobless claims are expected to tick modestly higher to 225,000 in the week ended November 19, setting the stage for another strong non-farm payrolls report next week. New home sales might continue their decline, but could be skewed slightly higher by rebounds in some of the states hit by storms in September. And markets will focus on the inflation expectations measure included in the University of Michigan’s final reading for November consumer sentiment – if the previously-reported increase holds,

Minutes taken during the Fed’s early-November meeting might land with nary a ripple, but a more hawkish-than-expected tone could trigger a flurry of trading activity in thin markets. The central bank’s decision to note the “cumulative” effects of prior tightening has helped drive a wholesale loosening in financial conditions since the meeting, but details of the rate-setting committee’s deliberations could show that investors have overestimated the odds on a “pivot” in early 2023.

Please note: Market Briefing will go quiet over the next two days as North American trading comes to a standstill. A happy Thanksgiving to those who celebrate it.

Karl Schamotta, Chief Market Strategist