Eyes on central banks in global markets

In global markets, a negative trend has been observed as concerns grow that conflicts in the Middle East could spread to wider areas and that, following stronger-than-expected economic data in the US, the policy rate will be kept at high levels for longer than anticipated; meanwhile, eyes are turning to the interest rate decisions of major central banks, led by the US Federal Reserve (Fed), in the coming week.

The fact that the Israel-Palestine conflict, which began on October 7, continues despite reactions from all over the world is increasing risk perception in the markets, while news flow regarding the issue continues to influence the direction of the markets.

Analysts recalled that in money market pricing, it is considered a certainty that the Fed will keep the policy rate steady at the 5.25-5.50 percent range at its monetary policy committee meeting next Wednesday, emphasizing that expectations that the bank will keep rates steady until 2024 remain strong in the pricing.

Emphasizing the importance of the statements to be included in the meeting minutes to be released after the decision, analysts stated that the remarks to be made by Fed Chair Jerome Powell following the meeting could increase volatility in the markets.

Analysts noted that non-farm payrolls and ADP private sector employment data, which are among the most important indicators the Fed considers when making monetary policy decisions, could also provide signals about the steps the bank might take in the future.

In a week where a busy macroeconomic data calendar was followed alongside developments in the Middle East, concerns that the bank would keep the policy rate at high levels for longer than expected increased as the data released showed that the US economy remained strong despite the Fed's "hawkish" steps.

The US economy grew by 4.9 percent on an annual basis in the third quarter of this year, exceeding expectations and recording its fastest growth since the last quarter of 2021.

While consumer spending in the country increased by 0.7 percent in September, exceeding estimates, income recorded a lower-than-expected increase of 0.3 percent.

The core personal consumption expenditures price index, which the Fed considers as an inflation indicator and which excludes food and energy items, increased by 0.3 percent on a monthly basis and 3.7 percent on an annual basis in the same period, in line with market expectations.

International credit rating agency Fitch Ratings reported in a statement regarding the data that strong consumer spending and employment growth support US economic growth, and that global bond yields have also risen significantly in recent months.

In the statement from Fitch, it was emphasized that the rise in bond yields occurred despite signals from central banks that policy interest rates are approaching their peaks and clear evidence that the monetary tightening implemented is now putting pressure on credit growth.

On the other hand, the US 10-year bond yield, which hit a 16-year high of 5.02 percent at the beginning of the week, retreated by approximately 18 basis points from there to finish the week at 4.84 percent, while the dollar index closed the week at 106.6, up 0.4 percent on a weekly basis.

While the failure of tensions to subside in the Middle East has a direct impact on commodity prices, the ounce price of gold, which extended its upward trend for the 3rd consecutive week, finished the week at 2,005.9 dollars with a 1.2 percent increase. Thus, ounce gold exceeded 2,000 dollars for the first time in about 5 months.