So, the Fed is finished raising interest rates and given their revised outlook for lower inflation and slower growth, Fed Chairman Powell conceded that policymakers were now starting to think about when rate cuts will be appropriate. The concession that the timing of rate cuts was now up for discussion was a more dovish development than markets were expecting.

Now, with the Fed leadership remarking that the FOMC was starting to consider the timing for rate cuts, markets are – unsurprisingly – betting on an early start to the easing cycle in 2024; swaps are pricing in 25 bps of easing by March. US 10Y yields are below 4%. The USD tumbled following the Fed decision as US yields retreated and the stocks took off. That pattern has extended today, with nearly all the major currencies posting gains on the USD.

The DXY is pressuring the late November low of 102.47; loss of support here suggests potential for a further (roughly 1.5%) drop in the USD broadly in the next few weeks.