Recently, the rising expectations of rate cuts actually reflect how traders dynamically adjust their positions based on economic data.

Let's look at the core data first. The latest report from the U.S. Bureau of Labor Statistics shows that core inflation growth is below market expectations. This signal is very clear—inflationary pressures are easing, and the Federal Reserve no longer needs to be in such a rush to raise interest rates. There is more room for policy adjustments in the short term.

Market expectations for the timing of rate cuts are also adjusting accordingly. Although a rate cut in June remains the mainstream view, the probability of a rate cut in April has increased from 38% to 42%. This is not a small change, indicating that some traders are "adding bets" on an earlier rate cut. After all, in financial markets, even a 0.5-second information advantage can determine the outcome, let alone a two-month time difference.

Another detail worth noting is that Powell's term ends in May, but the market generally believes that the Federal Reserve will not delay policy adjustments just to wait for his successor to take office. From a different perspective, if economic data continues to improve, the Fed is likely to act independently of the Chair's schedule. This "data-driven" decision-making logic changes how traders tracking policy trends perceive the timing of rate cuts.

Here's the entire logical chain: inflation below expectations → less room for rate hikes → the Fed may shift focus to growth risks → earlier rate cuts → the market immediately rebalances its positions. This is the true picture of the current market.