Global Monetary Policy Gets More Normalized
The real exchange rate has been very stable over the past few months, despite great differences in monetary and fiscal policies worldwide, frequent occurrences of geopolitical events, and substantial fluctuations in global commodity prices. Currently, monetary and fiscal policies are slowly returning to normal, commodity prices are stable as the global economy is expanding, and the exchange rate is expected to float within a relatively narrow range.
Global investors will adjust their expectations over the next 12 to 18 months to accommodate the fact that US is getting more radical in its normalization of monetary policy. The actual broad trade-weighted dollar index will grow by 5 to 10 percent.