Market awaits FED’ verdict – could be dovish surprise

Federal open market committee to hold monetary policy meeting today. Decision is to be announced at 18:00 GMT, followed by press conference at 18:30 GMT.

• According to latest FED communication, June may not be the month for hike as many participants believe there won't be sufficient data available by that time to ensure a rate hike. So FED is likely to hold policy steady today.

• Initial focus will be on Monetary policy statement, followed by participant's projection and finally on FED Chair Janet Yellen's speech.
  
  
• Forecast is an important aspect of today's policy. Last FOMC projected growth to reach between 2.3%-2.7% and unemployment to 4.9-5.1% by 2016.
  
  
• Inflation forecast is the main area to focus on. Previous report saw downgrade in forecast. Forecast was 0.6-0.8% for 2015 and 1.7%-1.9% for next year.

• Statement would be read as dovish or hawkish depending on the tilt in forecast.

• For the bond yields and Dollar one of the most vital is median forecast of FED funds rate by market participants. As per last report, 15 of the policymaker believed 2015 is ideal for rate hike against 2 officials calling for 2016. A higher shift from 2015-2016 would be considered dovish. Average rate forecast for 2015 is still above 0.5% against market expectation of just one hike. A drop is expected in today's forecast.

• Press conference by chair Yellen is to be watched closely for further indication on policy moves and her reactions to various asking. Her view over the economy and inflation would do the final bidding on dollar's fate.

• FED chair Yellen's view on Dollar and Greek situation will be interesting to watch.

Dollar index is currently trading at 94.8, is likely to remain downside biased unless it clears 96 area of resistance. Support lies at recent low around 93.3.