It is tricky to forecast the USD trajectory because of its multi-faceted nature.when global economic growth is decent, USD tends to be positively correlated with the relative US growth outlook (i.e., the stronger the relative growth, the stronger the greenback). A contractionary economic environment, however, would see the USD having a negative correlation with growth, meaning the currency becomes a safe haven.The softer US growth backdrop has been consistent with the USD weakness observed as of late, and a lot of that has been priced in, Since the announcement, President Trump has come out and opened the door for negotiations on tariffs, which may suggest that the announced weighted average tariff of 18% may be at the high end of the range and the 10% floor at the bottom of the range. At least from that perspective, the uncertainty of outcomes may have narrowed.What will happen to interest rates, and how many more Fed cuts should we expect?

The short answer is that no one knows what will happen over the short term. After the reciprocal tariffs were announced, two prominent banks stepped out and forecasted divergent views on rate cuts. One bank predicted more rate cuts in 2025 as growth slows down due to tariffs, and the other bank predicted no rate cuts, foreseeing that inflation may be higher. This shows you how confusing the situation is, even for experts.