The Federal Reserve is set to raise interest rates in March. They basically laid down the message. Calling them “thick hints” would be an understatement. The strong NFP left no room for doubts.And now, is it already priced in? Can we expect a massive “sell the fact” reaction? There are many moving parts that will determine the next move of the US dollar.

Here is a preview for the Fed decision on March 15th at 18:00 GMT. We begin with some background, the data facing the Fed and three scenarios.

From wait and see to a compelling case

The Fed raised rates only twice since the financial crisis: in December 2015 and December 2016. When they hiked back in December 2016, they raised the forecast for rates in 2017 from two to three hikes. While this extended the post-election USD-gains, markets remained skeptical about seeing two hikes in 2017. The initial hike was circled for June.

The disappointing wage numbers for January and the fact that some members priced in Trump’s spending promises into their forecast set the stage for a cool-down. But that changed quickly. Will they cool expectations now?

A well-coordinated chorus then began talking about a “compelling case” for raising the rates “relatively soon”. This included not only hawks but also centrists such as Fischer and Williams and also encompassed doves such as Dudley and Brainard. The chorus culminated with Fed Chair Yellen basically saying that the Fed will act barring a disaster. Job gains of 235K and wages rising 2.8% is very far from a disaster.

So, a rate hike is coming.

So the dollar depends on the dot-plot

The next moves of the Fed depend on the data and how the Fed interprets this data. Apart from announcing the hike, they will release their usual statement, and more importantly, new forecasts.

The Fed publishes growth, employment, inflation, and interest rate projections. The latter are the most important. A change in the interest rate expectations has the strongest impact and can overshadow any over forecasts, the statement and Yellen’s words in the press conference that is scheduled for 18:30 GMT.