Disappointing US economic performances in the first quarter of 2015 which lead to doubts over whether Federal Reserve will be able to hike rates as promised-- that is within this year.

If there are reasons why Greenback has been staying under pressure for nearly a month now, then they are because of disappointing US economic performances in the first quarter of 2015 which lead to doubts over whether Federal Reserve will be able to hike rates as promised-- that is within this year. However, highlighting this matter is the fact that more and more dovish statements came out of the woods.

Dovish

 

Bad Days

Disappointing economic performances throughout the first three months of the year can be attributed not only to the harsh winter but also cheap oil prices. As a country in which oil plays a huge part in both producer and consumer sides, cheap fuel price might be a booster if excess funds was allocated to spending in other kinds of goods and services.

However, despite of the low interest rates environment, it seemed people are still preferring to save rather than spend. This fact turned lay-offs and drilling closures in the oil industry into heavier burden for the economy. Add to that, overtly strong Dollar in the same period put pressures into the external sector and multinational businesses. The first quarter of 2015 is a difficult time for US economic recovery in many ways.

In the circumstances, it is understandable that many doubts Fed rate hike can be done earlier than September. After all, raising benchmark rates amid underperforming economy may be an inerasable blunder. Still, raising rates too late may also be a different kind of blunder if bubble or such explodes due to prolonged low rate. However, what the Fed FOMC members have been projecting recently is the readiness to defend low rate if rate hike prerequisites are not fulfilled.

 

A Group Of Doves

Post-FOMC meeting statement this month alleged harsh winter as the cause of less-than-expected economic performances. However, they also refused to pinpoint a schedule for rate hike, gave raise to speculation whether a June hike is impossible and a September hike is still too soon. Subsequent speeches and intervews with FOMC voting members by various media underlined their thoughts that priotirize seeking actual and sustainable improvement in the job market and inflation over rate hike, a typical dovish view.

Charles Evans in May 4 stated that he wanted to see more proof of wages improvements before they decide to hike rates. And again yesterday (18/5), he said in Stockholm that the Fed ought to target inflation above the 2 percent target by keeping rates near zero until the beginning of 2016. Similar voices has also been spoken out by several other members in various expressions.

Before their very first meeting this year, the ten members of 2015 Federal Open Meeting Commitee has been identified as having strong dovish inclination, most notably the Chairperson Janet Yellen, Vice Chair William Dudley, Fed Chicago's Charles Evans, and Fed Atlanta's Dennis Lockhart. There are no hawks among the ten members and only two centrist wield voting rights: Lael Brainard and Jerome Powell. Cosidering these facts, it should not be a surprise if Fed FOMC decide to delay rate hike to the end of 2015 or even to 2016.

With this background, two must watch event in regard to the US Dollar this week are FOMC Meeting Minutes and US inflation figures release. FOMC Meeting Minutes as usual should not make heavy ripples across the market, but people will still seek hints. Inflation figures will be watched more closely as it will show whether inflation has started to pick up in the beginning of second quarter or not. Although this by no means undermines other data releases scheduled in the fundamental calendar, but be aware that key movements may happen following the two events.