Trump made good on his promise, imposing tariffs on dozensof countries starting April 9. But it didn't last long. Just hours later, theU.S. president posted on Truth Social, announcing a “90-day PAUSE” and asignificantly reduced reciprocal tariff during that time. The markets reactedinstantly.

The S&P 500, Nasdaq, and Dow Jones bouncedenthusiastically, along with other risk assets. Later, Trump framed it as a bigwin, casually bragging about how much two executives had gained from the move.The optimism carried through the rest of the week, helping the indexes close inthe green.

Meanwhile, tensions between the U.S. and China not onlypersisted but escalated, briefly shaking investor confidence as both sidesraised tariffs to near-prohibitive levels. But hey, what's a little globaleconomic slowdown between two world powers? It's not that big a deal... (cuethe sarcasm).

Apparently, only the business world is worried. AsReuters says: “Sweeping tariffs imposed by U.S. President Donald Trumpsince April 2 and subsequent pauses in some of them have created uncertaintyfor companies around the world, causing some to pull back or refrain fromissuing financial guidance.”

No wonder the DXYcontinues to struggle to recover; in fact, itsinks further as traders redouble their bets that the euro will continue torise after breaking a long-term downtrend. Even words from U.S. Treasuryofficials that the U.S. continues to support a strong dollar policy have donelittle to stem the slide.

Markets are increasingly convinced that the US economy islosing steam and are now betting that the Fed could intervene with not just onebut possibly four rate cuts before the end of the year. All eyes are on JeromePowell's speech this Wednesday: Will he give any clues as to what lies ahead?

It's worth noting that the Fed’s biggest hesitationregarding further lowering rates is the risk of rising inflation — and thatconcern is not unfounded. After all, tariffs tend to drive up domestic prices.The hope is that the tariffs will dampen demand, which could help offsetinflationary pressures.

Will the dollar keep falling?

The dollar index dipped below 89 during Trump's first term,so there’s theoretically still room for a drop. However, if tariffs remain inplace, U.S. imports will likely decline. Fewer imports mean less demand forforeign currency, which could support a stronger dollar, but the effect willnot be instantaneous.