The Fed may soon cut interest rates. That could make your next trip abroad more expensive
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The U.S. Federal Reserve may start cutting interest rates before year's end, which could weaken the U.S. dollar and make future trips abroad more expensive for American travelers. Rising U.S. interest rates relative to those in other nations strengthen the U.S. dollar, allowing Americans to buy more with their money overseas. However, falling interest rates have the opposite effect, weakening the dollar and reducing Americans' purchasing power abroad. Fed officials expect to cut rates once in 2024 and four more times in 2025, which could put more pressure on the dollar. Some experts believe the dollar's strength may persist, while others think it will weaken. The strength of the U.S. dollar has given Americans a discount on purchases abroad, making travel more affordable. The dynamics driving dollar fluctuations are complex and depend on the differential in interest rates between the U.S. and other nations. A relatively strong U.S. economy and higher economic growth and/or inflation support a strong dollar. Additionally, foreigners may invest more in the U.S. when interest rates are high, further strengthening the dollar. Capital flows play a significant role in exchange rates. Currency fluctuations in emerging markets can be more volatile due to factors like political shocks and commodity price risks.

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https://www.cnbc.com/2024/07/10/why-the-fed-cutting-interest-rates-may-weaken-the-us-dollar.html