The U.S. dollar has been depreciating since the Fed hiked its key rate midmonth.

The decline’s “not in line with our scenario of monetary policy divergence,” says a Desjardins forecast report on foreign exchange. But, because the Fed was unclear on how its future monetary firming would play out, the markets interpreted the move as dovish, says the report.

Indeed, instead of assuming the Fed’s in a tightening cycle, it’s more useful for investors to think of forthcoming Fed rate hikes as a process to remove “a substantial amount of monetary policy accommodation sloshing through the global financial system,” says Richard Clarida, managing director at PIMCO, in a report.

He calls the cycle a removal of accommodation, or ROA, and says the real effective Fed funds rate remains accordingly negative and accommodative.

“Initial market reaction to the policy rate hikes — with stocks higher, credit spreads tighter and the dollar weaker — was consistent with this interpretation that the Fed intends a gradual path toward normalization,” he says. “Call it a dovish ROA.”

Though the Fed’s policy rate isn’t expected to effectively reach the nominal rate of 2% until the end of 2018, investors shouldn’t rest easy while markets buy into the plan, because three potential complications could dampen the rosy ROA scenario, says Clarida.

Read: Hike gave Fed “more breathing room,” says analyst

First, there’s the issue of how to shrink the $4.5-trillion U.S. balance sheet, resulting from years of quantitative easing (QE). Currently, there’s no plan in place for starting that process or giving it a timeline.

Second is the threat of geopolitics. Says Clarida: “As we saw in the summer of 2015 with the June sell-off in China equities and the August devaluation of the Chinese yuan, such global developments can interrupt the game plan and complicate Fed guidance.”

Last, the Fed’s board will see changes next year, as the chair’s term expires and other vacancies come up.

Desjardins notes the pause in monetary firming could limit the greenback’s gains while boosting the loonie. However, announcements by the Trump administration to support the U.S. economy with tax cuts, infrastructure spending and deregulation could reverse the trend — not to mention U.S. protectionism.

Desjardins forecasts the Canadian dollar at US$0.72 for year-end.

Read: Strong GDP, employment data could buoy loonie

Read the full Desjardins foreign exchange forecast here.

Read the full PIMCO report here.

Also read: Why U.S. equity valuations continue to climb