The Dollar Index flirted with 92 a few times last week but was consistently rejected. It’s now made its way above it as the euro and yen come under pressure.

I’m hesitant to take any signals ahead of the FOMC but the tone of the commentary around the FOMC has shifted dramatically in just two weeks. Back then, there was non-stop talk about rising bond yields and now commentators and economists don’t seem to be worried at all, and are talking about the Fed being more upbeat.

I’m not sure that’s going to be the case. Powell and other Fed members have consistently highlighted high unemployment and remaining patient through the reopening. It’s way to soon to be declaring victory and any kind of hint at tapering would undermine the Fed’s credibility.

At the same time, you can’t ignore the inflation picture. US 10-year breakevens are at 2.30% today, the highest since 2014.

That leaves the Fed in a tough spot, they could declare victory but if you send a tightening impulse as soon as the market sees above 2% inflation, then you only hammer home that 2% is a ceiling and that all the talk of an overshoot was hollow.

So I think they stay dovish and that risks to the dollar are on the downside. But of course Powell can’t control all the dots so that might undermine the message and keep the dollar bid.