The dollar remains lower as markets position for a smaller rate hike from the Federal Reserve. A possible interest rate cut late next year is the cornerstone of dollar weakness, Commerzbank economists report.
Monetary policy is shifting towards a more sustainable path
“Powell sounded a bit dovish, emphasizing the high uncertainty for the inflation outlook and the risks that would be associated with premature easing. However, for the moment, the only thing that seems relevant to financial markets is that the monetary policy of the Fed is ‘normalizing’. 75 basis point rate hikes to make up for too long a wobble in 2021 are history.”
“Monetary policy is shifting towards a more sustainable path. And that means that if inflation falls significantly next year and fears of a recession materialize, the market believes that interest rate cuts could be justified again as soon as soon as late 2023, which forms the cornerstone of dollar weakness that we also expect over the next year.”
Source: Fx Street
I am Joshua Winder, a senior-level journalist and editor at World Stock Market. I specialize in covering news related to the stock market and economic trends. With more than 8 years of experience in this field, I have become an expert in financial reporting.
