Fed's dots to delay dollar rally for now

Chair Yellen's insistence on seeing more decisive evidence of growth before raising rates, in addition to a shift in the composition of the 2015 dots weighed on the dollar after the statement and press conference. 

The statement maintained a relatively optimistic tone, one open for hikes later this year, but the market positioned for a clearer signal of a September hike and was disappointed. This contrasted with Chair Yellen's more non-committal and cautious tone with respect  to a September hike as they revised down their 2015 GDP forecasts and revised up their unemployment rate forecasts. 

The increasing risk for a later-than September hike will likely leave the dollar in consolidation mode for now, until data provide greater certainty for a September hike. The dollar will remain beholden to still long positioning and European-induced volatility for now.

In light of Governor Brainard's USD comments recently, Chair Yellen maintained a more standard tone towards the dollar. She noted that the impact of its appreciation was likely to continue (on exports and inflation), but did not seem concerned it would alter the timing of hikes. 

And, in any case the Fed does not have a target for the dollar, but sees as one factor influencing the economy. Her comments reduce the risk of a shift in tone on the USD post President Obama's dollar comment last week with the Chair still arguing US growth is strong enough to offset dollar drag.