In a December 18, 2023, Barchart article, I wrote:
The U.S., Europe, the United Kingdom, Japan, Canada, Sweden, and Switzerland are allies. Therefore, the U.S. dollar index measures the U.S. foreign exchange instrument against currencies with aligned geopolitical interests. The dollar index reflects an allied bloc, making it a mirage in the worldwide financial system. The Fed is a leading central bank, and many other allied central banks coordinate monetary policy over time. Therefore, U.S. dollar index component countries will likely follow U.S. rates lower over the coming months. Coordinated monetary policy lowers currency volatility, the goal for the allied central banks.
The Fed left the short-term Fed Funds Rate unchanged at the December 13 FOMC meeting. However, the surprise was the shift in tone and forecasts for cutting interest rates in 2024. The statement and Chairman Powell’s press conference had a significantly dovish tone. Stock, bond, and commodity markets roared after the Fed’s Greenspan-esque surprise.
