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The June FOMC meeting should be more market moving than its May iteration, as today’s meeting is one of the four during that year that sees a new summary of economic projections (SEPs) and a Fed Chair Janet Yellen press conference. As it were, the Fed, like the ECB, BOE, and RBNZ, in an effort to become transparent, has become predictable: they will only make a major policy change (i.e., hike rates) with justification in hand and an opportunity for Chair Yellen to explain to markets why they made their decision.

Up to this point, we’ve been led to believe that, ideally, the Federal Reserve, in its eyes, will hike rates twice more this year while announcing a change in their balance sheet policy by the end of the year. Given the calendar of press conferences and SEP releases, this would mean that the Fed has been looking to raise rates in June and September, before making the balance sheet wind down announcement in December.

Yet current market pricing coupled with recent US economic data have suggested otherwise. Currently, Fed funds futures are pricing in only one rate hike this year – today – and have no other rate hikes priced in for the rest of 2017 (per Fed funds futures). Balance sheet normalization is still a way’s off, at least according to markets.

Given that market pricing is more dovish than what the Fed has previously prescribed for its glide path of rates, an acknowledgement of the economy growing at a slower pace than anticipated (coupled with softening inflation readings) may cause the Fed to cut down their forecasts and reduce their glide path for interest rates. In other words, we’re looking for a ‘dovish hike’ today: the Fed will raise rates by 25-bps; but its forecasts, policy statement, and Yellen press conference will reduce the scope for further policy tightening.

A dovish hike would leave the US Dollar in an unenviable situation. While USD-pairs (and the DXY Index) have been relatively stable the past few sessions – not atypical in the run-up to a FOMC meeting – the low volatility environment is unlikely to persist today. In context of Crude Oil holding steady this week, USD/CAD’s sharp decline the past three days may be a warning sign of more greenback weakness to come.