Why the US dollar initially sold off on the removal of 'accommodative'

The old Fed statement said: "The stance of monetary policy remains accommodative." That line was completely erased in the latest statement.

That hurt the US dollar, so the question people are asking is: Why is removing accommodative dovish?

Here's the thinking. Once the Fed gets to accommodative, it means they will be hiking more slowly.

The point is that that the Fed wants to get to neutral. They don't know exactly where that is, but by no longer accommodative, it means that they might already be neutral. At the very least, it means that it's close.

If the Fed had left in the reference to accommodative, it would have been a strong sign about more future hikes in order to get to neutral.

What this doesn't address is how tight the Fed will get. If they fear inflation, they will hike above neutral. Fed Governor Brainard also introduced the idea of short-term neutral and long-term neutral. So while they could raise rates to a long-term neutral stance, that would not necessarily be above short-term neutral.

In the bigger picture, this isn't a huge change by any stretch but it's a mild surprise.

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