UK100 – Central bankers continue to push back without success

• Fed, ECB, and BoE officials push back against rate cut talk
• Investors not convinced by hawkish comments
• UK100 edges lower after bearish rebound

We are continuing to see sluggish trade in equity markets on Wednesday, 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.

A bearish signal after a year of sideways trading?

The UK100 has drifted lower since last Friday, interestingly at the start of that rebounding of a key technical resistance level.

UK100 Daily

Source – OANDA on Trading View

That level was around 7,500 where a rising trendline dating back to March 2020 – which it price briefly dipped below in August – coincided with the 50% Fibonacci retracement level.

This could be regarded as a confirmation of the 20 October breakout with the index having seen support on the trendline again earlier that month.

That it occurred around a key Fib level is also interesting and may suggest downward pressure is building after a year in which the index has generally trended sideways.

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