According to CoinDesk: As per market predictions, the US Federal Reserve (Fed) is anticipated to enact a 100 basis point rate cut next year, thus becoming the most dovish central bank among advanced nations. This position could potentially dampen the US dollar's attractiveness while stimulating risk-taking in both cryptocurrency and traditional markets.
Current market pricing from Deutsche Bank Research reveals that traders foresee an interest rate reduction of at least 1 percentage point by the Fed in 2024, with speculated rates shifting from the current 5.25% - 5.5% range. Such a move would impact the US dollar's appeal as an asset offering high yields.
ING predicts that the US economy and inflation rate will slow in 2024, thus permitting the Fed to adopt a more relaxed monetary policy. Similarly, Bank of America anticipates a broad adjustment of the US dollar towards equilibrium next year, as outlined in its November 19 report, "World at Glance".
While a weaker US dollar has been viewed as a tailwind for risk assets, including Bitcoin, it is crucial to note that heightened expectations of monetary easing may result in an abrupt dollar rally if inflation rebounds. Bank of America strategists have highlighted several 'known unknowns' that pose a significant risk to a weak USD base-case scenario, including a rate shock driven by growth or inflation originating in the US, an oil price shock due to supply factors, or growth shocks negatively impacting China.
