The Fed may start a rate cut cycle in the fourth quarter of this year, a move that is expected to have far-reaching effects on global financial markets, particularly regarding the dollar's performance, monetary policy in various countries, and capital flows.

First of all, the depreciation of the dollar seems to have become a high-probability event. Continuous interest rate cuts combined with fiscal easing policies will directly affect the monetary credit foundation of the dollar. Currently, the strength of the dollar index mainly stems from the relative weakness of the European economy, rather than the absolute advantage of the U.S. economy itself. The recent controversy over non-farm payroll data has led to a rapid decline in the dollar exchange rate. The logic behind the weakening of the dollar is clear: the dual easing of monetary and fiscal policy will dilute the credit of the dollar, while also weakening its appeal as a global reserve currency. In addition, the depreciation of the dollar is conducive to alleviating the debt pressure in the U.S. and improving the trade deficit, which may be a potential strategy for the U.S. to address current structural economic issues.

Secondly, the Fed's rate cut actions will create greater space for China's monetary policy. In the past, China often faced concerns about potential capital outflows due to the large interest rate differential between China and the US when considering monetary easing. If the Fed takes the lead in starting a rate cut cycle, the decline in US real interest rates will alleviate the pressure of capital outflows from China. This means that the People's Bank of China may follow suit by implementing measures such as reserve requirement ratio cuts and interest rate reductions to support domestic economic development.

Overall, the Fed's potential interest rate cuts will reshape the global financial landscape, affecting not only the movement of the dollar but also triggering a chain reaction in the monetary policies of various countries and a redistribution of capital flows. In this situation, central banks around the world need to carefully weigh their options to respond to the challenges and opportunities brought about by the new monetary policy environment.