Central bankers continue to push back without success

1 min read

By Craig Erlam  

We continue to see sluggish trade in equity markets, with investors battling hawkish commentary from central banks against downbeat economic expectations and speculation around rate cuts next year.

Even if central banks were of the view that rates could fall next year, it would be unrealistic to expect them to say so at this stage as it would confuse and undermine their message that rates must stay higher for longer.

This is intentionally ambiguous as they can’t say with confidence how high or for how long, only that the topic of rate cuts is not even being considered. Investors think in a different way and the timing and pace of rate cuts are important. They’ve been far too optimistic this past year but it seems that’s going to carry on into 2024.

So, while policymakers from the Fed, ECB, and BoE have all been pushing back against such speculation – some more forcefully than others – they haven’t been particularly successful in dampening the mood, even if it wasn’t particularly upbeat to begin with.

Ultimately, for investors as well as policymakers, the data will dictate what comes in the new year and perhaps all of this speculation is simply something to fill the data void we have this week.

Lowest oil prices since July

Oil prices have hit their lowest levels since July as weaker economic expectations continue to weigh.

Trade data from China further soured the mood and contributed to sharp falls. The focus is clearly shifting from undersupply to weak demand and central banks insisting that rates must remain high could further exacerbate that.

And frequent reminders that Saudi Arabia and Russia will maintain cuts until the end of the year aren’t doing anything to offset this, as it was never assumed they would change their minds. Especially now prices are falling.

An extension announcement later this month could give oil prices a boost.

Gold correction continues

Gold is edging lower again, after failing to break $2,000 last week.

The yellow metal is struggling against a rebound in shorter-term US yields following sharp falls last week. In the absence of new data, we may simply be seeing a correction as policymakers continue to push back.


Craig Erlam is Senior Market Analyst, UK & EMEA at OANDA

Opinions are the author’s, not necessarily that of OANDA Global Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. Losses can exceed investments.