The market is abuzz with excitement this week as the probability of a rate cut before June has doubled. According to experts, the odds are now 3:1 against a cut, which means the chances of a rate hike have become even money. This sudden shift in sentiment can be attributed to several factors, including improved economic data and a more optimistic outlook for global growth.

The recent surge in market volatility has been a major driver of this change in sentiment. The ongoing trade tensions between the US and China have had a significant impact on investor confidence, leading to increased uncertainty and risk aversion. However, with the signing of the phase one deal and the subsequent easing of tensions, investors are feeling more optimistic about the future.

The improved economic data has also played a role in the shift in sentiment. The latest GDP numbers, for example, showed a surprise increase in growth, which has helped to boost confidence in the economy. Additionally, the unemployment rate has remained low, indicating a strong labor market and further supporting the case for a rate cut.

The Federal Reserve’s decision-making process is also a factor in the increased probability of a rate cut. The Fed has made it clear that they will take a data-driven approach to monetary policy, and with the recent improvement in economic data, it is likely that they will consider a rate cut as a way to support the economy.

Of course, there are still risks and uncertainties that could impact the market’s sentiment. The ongoing COVID-19 pandemic, for example, remains a major concern, and any signs of a resurgence in cases could lead to a reversal of the rate cut expectations. Additionally, geopolitical tensions and inflation concerns could also impact the market’s sentiment.