Nothing is like FED, when it comes to weakening the greenback

The dollar has been suffering since mid-December

Federal Reserve shared in their economic projections that increase of the rates is over and the lower borrowing costs are expected next year. That was enough to shake American currency and US Dollar weakened immediately. It happened on December 13th and since then currencies have been finding another equilibrium, generally strengthening against the dollar. ?Assets which grew last month include Euro, Israeli Shekel, Polish Z?oty, gold, and Bitcoin. The last one is experiencing the impressive surge and is already 17% up comparing to end of November levels.

Events in Ukraine are insignificant

The dynamic reaction to the FED announcement is an another strong proof that global confusions and unrests play a very limited role in regard to currency markets. The war in Ukraine has been going on for twenty months and recently its outcome became even more uncertain than before. In United States policy makers are still discussing the feasibility of the next round of financial and equipment to Ukraine. Major players of European Union, including Germany, come back expressing their lack of enthusiasm for protracted conflict. One can certainly doubts whether Ukraine will keep on getting international help the same way it used to before. The risk of weaker support is concerning especially with Russian efforts to fight back territories Ukraine was able to get back last summer. This uncertainty should impact currencies of Poland, the country which directly borders Ukraine, and Eurozone. It did not happen. Comparing to FED’s policies events in Ukraine remain insignificant.

Shekel, gold, and Bitcoin shine

Israeli Shekel is also up this month. The currency is far above its weakest level related to the outburst of Israel-Hamas conflict. Shekel gained almost 4% to US dollar last month, twice as much as Polish Z?oty. For comparison: gold grew ca. 3% and Euro 1% at the same time. But the real hero is Bitcoin with its 17% growth. ?From the list of asset I have been monitoring since February 2022 Bitcoin, Shekel, and gold are top three performers. Bitcoin is already 17.3% over its pre-war level. The other assets which managed to improve since the war in Ukraine began are gold and Z?oty priced respectively7.4% and 3.2% over February 2022 levels.

Gold, Euro, Bitcoin, Shekel and Z?oty price in USD for last 21 months. All assets has grown since October. Z?oty and gold are worth more today than before the war. Bitcoin just reached its pre-war price level. The chart showing relative change of the average market price of EUR and PLN (in USD); data source: xe.com

Central banks rule fiat currencies

Once I concluded ‘Central banks matter more than armies” discussing the major fall of Polish Z?oty value related to the rate cut made by Polish central bank. I still wonder whether central banks are really good in strengthening their currencies, but have no doubt they are great in making currencies weak. In September Polish monetary guardians did it, Americans from FED did it in December. No single military or political factor is able to impact currency performance in a comparable way. It is clear, that FED could take into account both wars, in Gaza, and in Ukraine while preparing its statement, but even if it was the case, those wars would influenced currency markets only indirectly. The direct reason of weaker dollar is the Fed only.

The monthly briefings about asset performance since the beginning of the war are available here (Shekel was added this month only):

Summary of November 24th; 2023:

·?????? on digitalbankology blog

·?????? on Linkedin

Summary of October 24th; 2023:

·?????? on digitalbankology blog

·?????? on Linkedin

Summary of September 24th; 2023:

·?????? on digitalbankology blog

·?????? on Linkedin

Summary of August 24th; 2023:

·?????? on digitalbankology blog

·?????? on Linkedin

Summary of July 24th; 2023:

·?????? on digitalbankology blog

·?????? on Linkedin

Summary of June 24th; 2023:

·?????? on digitalbankology blog

·?????? on Linkedin

Summary of May 24th; 2023:

·?????? on digitalbankology blog

·?????? on Linkedin

Summary of April 24th; 2023:

·?????? on digitalbankology blog

·?????? on Linkedin

Summary of March 24th; 2023:

·?????? on digitalbankology blog

·?????? on Linkedin

Summary of Fabruary 24th; 2023:

·?????? on digitalbankology blog

·?????? on Linkedin

Summary of January 24th?; 2023:

·?????? on digitalbankology blog

·?????? on Linkedin

Summary of December 24th:

·?????? on digitalbankology blog

·?????? on Linkedin

Summary of November 24th:

·?????? on digitalbankology blog

·?????? on Linkedin

Summary of October 24th:

·?????? on digitalbankology blog

·?????? on Linkedin

Summary of September 24th:

·?????? on digitalbankology blog

·?????? on Linkedin

Summary of August 24th:

·?????? on digitalbankology blog

·?????? on Linkedin

Summary of July 24th:

·?????? on digitalbankology blog

·?????? on Linkedin

Summary of June 24th:

·?????? on digitalbankology blog

·?????? on Linkedin

Summary of May 24th:

·?????? on digitalbankology blog

·?????? on Linkedin

Summary of April 24th:

·?????? on digitalbankology blog

·?????? on Linkedin

Summary of March 24th:

·?????? on digitalbankology blog

·?????? on Linkedin