Last week, I revealed a potentially game-changing scenario where market expectations about interest rates could be completely misguided, and guess what? That scenario is unfolding right before our eyes!

A 10% baseline tariff on the UK initially raised eyebrows, but the recent US-China announcements have totally flipped the script, exceeding all expectations and hinting at a surge in global growth. This could be a turning point!

The crux of the matter is clear: recent economic reports show businesses have been playing it safe due to tariff uncertainties, stalling economic activity. However, with these optimistic developments, we could see a swift rebound in momentum.

But it doesn’t stop there. The Federal Reserve may find themselves in a tight spot; increasing inflationary pressures coupled with rebounding economic data might force them to adopt a more cautious stance on interest rate changes.

Analysts are now predicting at least one rate cut this year, but there’s a big possibility that it might only be in 2025! Just a month ago, during peak market anxiety, predictions suggested up to five cuts by the end of the year. Now, those projections have dwindled down to just two cuts, translating to about 55 basis points.

This leads us back to pre-April 2 predictions. How the economy performs moving forward will ultimately dictate whether we'll see just one cut or the previously anticipated two cuts that the Fed hinted at back in December.

In the short term, all of this is fantastic news for the US Dollar, especially since short positions on the dollar have reached fever pitch. However, as we finish adjusting interest rate expectations, eyes will shift back to global growth, and that positive sentiment could put the dollar under pressure once again.