Central banks: Political economy pressures build – Rabobank

Rabobank’s RaboResearch Global Economics & Markets has highlighted the growing political pressure faced by central banks. The report asserts that central banks hold a crucial position within the political economy and may undergo transformative shifts. In Europe, Italian Prime Minister Meloni is reportedly urging European Commission President von der Leyen to permit countries to spend excessively in an effort to combat the ongoing energy crisis.

The report anticipates that the European Central Bank (ECB) will closely monitor the impact on inflation if such actions are taken.

Former Federal Reserve Chair and current Federal Open Market Committee (FOMC) member Powell was recently cleared of criminal misconduct related to the $2.5 billion renovation of the Fed building. However, the report identified "deficiencies" in his project leadership, raising questions about the appropriateness of his role in such a high-stakes position and budget.

Former UK Prime Minister Truss made headlines again, claiming she was removed from office by a liberal deep state that includes the Bank of England, an institution she had vowed to reform.

The Australian dollar traded in a narrow range around 0.6900 during the Asian session on Thursday, as bullish US dollar sentiment prevailed. October’s Federal Reserve’s Personal Consumption Expenditures (PCE) data somewhat dampened expectations for an upcoming Federal Reserve rate hike. However, concerns over oil-driven inflation continue to bolster elevated US bond yields. Meanwhile, Australia's trade surplus contracted sharply in August, reaching AUD495 million, with minimal impact on the Australian dollar's performance.

USD/JPY remained near the top of its weekly range, trading above 158.00 in the Asian session on Thursday. Despite the softer-than-expected US PCE data, inflation risks stemming from oil prices keep US bond yields near multi-year peaks. The ongoing US-Iran standoff further supports the safe-haven US dollar and strengthens its position. A stronger-than-anticipated US Dollar counters hawkish expectations from the Bank of Japan (BoJ) and raises intervention risks for the Japanese yen.

Gold struggled to capitalize on a modest intraday surge, reaching the $4,200 level, but closed nearly unchanged for the day during the first half of the European session. This performance is attributed to the persistent weakness in US inflation data, coupled with the continued surge in US bond yields, which hampers demand for non-yielding assets like gold.

Hyperliquid (HYPE) experienced a decline of 2% at press time on Thursday, reducing its 5% gains from the previous day. Institutional investments are gradually decreasing, with $5 million in outflows reported on Wednesday, casting a shadow over short-term investor sentiment.

Technical analysis for HYPE suggests a mixed near-term outlook, with the price currently capped below the $90 level. In the broader forex market, the EUR/USD pair dropped to its lowest level since May 2025 but could receive a boost from a potential fresh inflation shock in the Eurozone. The pair opened at 1.1312 on Wednesday, trading well below its January peak of 1.2082.

This decline can be attributed to a confluence of factors, including the strength of the US Dollar, geopolitical uncertainties, and renewed concerns over Europe's vulnerability to higher energy prices.