Dollar remains strong, but investors start considering rate cuts againTraders are more concerned about economic growth than hot inflationGold extends recovery as fading rate hike bets increase its appealS&P 500 and Nasdaq slide, stock futures point to higher openGrowth Worries Outweigh Inflation FearsThe US dollar continued to gain ground against the other major currencies, with the only exception being the Japanese yen, which remained strong amid intensified intervention warnings by Japanese authorities and signals by the BoJ that a rate hike on April 28 may be well warranted.The dollar stayed strong amid further escalation in the Middle East, with Yemen’s Houthis attacking Israel and US President Trump threatening to seize Kharg Island. That said, the rally in the US dollar has not been translating into Fed rate hike bets this week, as investors may have become more concerned about the implications of the war on global growth rather than inflation spiraling out of control.Indeed, the International Monetary Fund (IMF) warned yesterday that the conflict has caused serious disruptions to the economies of frontline countries, and it is dimming the outlook for many other economies that have just started to find their footing from previous crises.Investors Bring Rate Cut Bets Back on the TableThe increasing fear of stagflation has prompted investors to scale back their rate hike bets and revive bets of a potential reduction. According to Fed funds futures, there is currently a 20% probability of a 25bps rate increase by the end of the year. That chance could go even higher if Friday’s nonfarm payrolls point to a softening labor market, especially after last month’s report revealed a heartbreaking 92k job loss.Remarks by Fed Chair Powell may have also led traders to re-evaluate the case of a rate cut by the end of the year. Powell said that inflation expectations appear “well anchored” and that monetary policy is in a good place to “wait and see” the effects of surging oil prices, which for now are considered short-term spikes.Today, a Wall Street Journal (WSJ) report said that US President Trump is willing to stop attacking Iran even if the Strait of Hormuz is not reopened. That said, the US dollar did not flinch as traders remained unconvinced about an imminent truce. After all, the US sent more ground troops to Iran just yesterday.Gold Recovers More, Euro Traders Await Data, Stocks SlideGold extended its recovery, confirming the idea that it is maybe time to shine again and reclaim the “ultimate safe haven” title. With investors scaling back their Fed rate hike bets amid worries about economic wounds stemming from the war, there may be little room for the dollar to further strengthen. Thus, it may be time for market participants to seek shelter elsewhere and gold may be the ideal choice.The euro continues to struggle against its US counterpart, even though market participants are expecting nearly three quarter-point rate hikes by the ECB to tackle a potential spike in inflation.It seems that the region’s huge reliance on energy imports has sparked recession concerns and thus signs of further acceleration of inflation in today’s flash CPI data are unlikely to add fuel to the common currency’s engines. On the contrary, they may add to growth-related concerns, leaving the currency vulnerable to further declines.On Wall Street, the Dow Jones eked out some gains yesterday, but both the S&P 500 and the Nasdaq gave back earlier profits to close the first session of the week in the red. That said, stock futures edged up again today as oil prices pulled slightly back following Trump’s remarks that he is willing to end the war even if the Strait of Hormuz does not reopen.