Hello everyone! First time post, I searched and didn't see anything on my topic so I'm hoping someone can give me advice.
I have owned several dogs but never encountered this before.
I just adopted a rescue 3 yr old daschund mix, she actually looks like a miniature labrador and her new name is Magnolia. She is shy but has made huge strides this past week. When I brought her home I discovered she was terrifed of cats, I have 2 which has been problematic for her. My cats LOVE dogs, they have no fear of the ones that I have owned or have visted us. Naturally when I brought the new dog home they adored her upon site and wanted to be good pals right away but Magnolia found this overwhelming and exhibited fear towards them. She would actually turn her head and look away from them and still does when they may come in her direction. She has yelped several times when one walks up to her and sits and stares at her. Until I read the forums here I found this behaviour really bizarre but now I understand she was likely trained to do this.
She will also go hide behind the couch if she has the opportunity when she sees one of the cats. I should mention that my cats would never hurt her or any dog. They will spar together in play but that's about it.
So my question is - should I be doing anything to help Magnolia adjust to the cats or should it just happen over time? I feel bad that she is so fearful of them and want to help her overcome this awful feeling. I feel guilty for bringing her into a home where she doesn't feel happy. I have been coaching the cats to give her some space too, maybe I should focus on their behaviour more than the dogs fear? Obviously I'm delighted she isn't aggressive towards the cats but I just want her to feel comfortable with them too. Currently I work where we can bring our dogs with us which is great, she loves being around other dogs and her confidence level goes up but when we come home it's a different story.

Does the dog have a place where the cannot get to her?

If she has a decent food drive you could feed her tiny high value food treats when the cats are around her. Make sure you don't give her treats when she is acting very fearful or you will reinforce that behavior.

Marker training would be an excellent thing to do with her to distract her when the cats are near her. Start with the cats in another room until she gets in the habit of paying attention to you during the training. Gradually work her with them being progressively closer to her. She should eventually associate the cats with good stuff, or at least learn to tolerate them.

Hi Connie - yes, the dog very quickly learned behind the sofa against a wall was her safe place. She could also go into her crate but hasn't done so on her own yet. She is with me most of the day at work so I have found she tends to go off to her bed in the living room and will happily stay there until one of the cats comes along and then she will go hide.

Hi Debbie - this dog isn't a big eater which is kind of odd since I'm used to dogs that would eat all day if I had let them. She doesn't seem big on treats, I've tried her on several different types but she has no interest in them. She eats her food which is a good quality dry dog food but never wants more than the recommended amount. I guess it's still early days yet

Today something strange happened, she actually growled when I gave some other dogs at work some of her treats (that she doesn't like) and when I gave her one she didn't want it as per usual. She is such a timid thing that the growling seemed out of character up to now.