The money market in 2022 witnessed severe currency wars as major central banks were rushing to raise interest rates and deliver other measures to strengthen their currencies to confront high inflation. The Federal Reserve (Fed) certainly had the largest arsenal of measures to fight against inflation and the U.S. economy is in much better shape than the rest of the world. Thus, the U.S. Dollar index rose by 10% by the last autumn.

The Dollar has lost its momentum since then as the economic situation is evolving. Gas prices in Europe fell dramatically below the levels seen before the Russian-Ukrainian war started in February 2022, and the German economy has avoided a technical recession so far. China’s economy is reopening after continuous isolation. Investors fearfully hope that the global economy will demonstrate higher growth in 2023 above 1.7% forecasted by the World Bank.

Wall Street is debating the U-turn of the Fed’s monetary policy this year despite no assurances from the Fed itself. However, slowing down inflation and recession fears would force the Fed to change its monetary stance, according to some Wall Street analysts. This is why the stock market in the U.S. has performed its best rally for the last two months. If such a sentiment will continue to dominate the market, we may see capital flows reversing from the safe haven Dollar to more risky and perspective assets like U.S. stocks.