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The US dollar was hit twice by Fed Chair Janet Yellen: her dovish words accompanying the Fed decision on March 17th were followed by an extremely “glass half empty” speech on March 30th. In between, we did see the US dollar rising on some hawkish talk from her colleagues.

But after the second time around, the hawkish talk, even coming from two known doves, leaves traders a bit  cautious:

  • Rosengren: The president of the Boston Fed is a known dove. He spoke in his home turf and said that a hike is more likely than markets price in. Does he see the next move coming in June? Markets certainly don’t see that. They only see a hike in December.  This was quite surprising and we haven’t heard from him in quite some time. He did add that the outlook calls for gradual and data dependent hikes, but he also emphasized  that the outlook is better than market expectations and that the economy is doing well against global headwinds. That sounds very “glass half full”.
  • Evans: The president of the Chicago Fed already  spoke in between Yellen’s two dovish appearances, but  the details he provided still sounded surprising. He was uncertain about inflation and did stress the data  dependency. Nevertheless, he talked about two rate hikes: either one in the summer and one close to the end of the year, or one in the fall and another at the end of the year. A hike in  autumn seems unlikely given the upcoming elections, but you can never know.

The US dollar is stronger against many currencies, but this is a “safe haven” play: the Japanese yen  over-towers  the board with USD/JPY falling to lows last seen in late 2014. It is easy for the greenback to beat commodity currencies on such a  negative day for stocks and commodities, but the markets are taking the hawkish words of both Fed doves with two big grains of salt.

The dollar faces a big test today: the  ISM Non-Manufacturing PMI. See how to trade the services sector report with EUR/USD.