Patience, wrote Ambrose Bierce in The Devil’s Dictionary, is “a minor form of despair, disguised as a virtue”.

On Wednesday, the US Federal Reserve is expected to ditch its “patient” policy, leaving it open to raise rates as soon as June. The progress of the US economy suggests there may be some resistance — while positioning in the markets suggests any doubt about rising rates could depress the dollar and asset prices.

Economic data have been almost uniformly negative over the past month. Retail sales last week recorded their biggest three-month drop since the aftermath of Lehman’s failure. Consumer sentiment plummeted, as did producer prices. On a Bloomberg measure of “surprise”, economic data are disappointing forecasters more than at any time since 2009.

The dollar does not care. In part this is because buyers are focused on the Fed, which seems to be focused on jobs and wages — and job creation is the one area that has been surprisingly strong.

But in part it is because investors and economists are looking beyond the first quarter. The consensus for US economic growth in the first three months of the year has tumbled, from 2.8 per cent at the start of February to 2.4 per cent today. This would usually be taken as bad news by investors. Not this time: economists predict a rebound, with the full-year consensus for 3 per cent growth, down a bit recently but the same as in January.

Janet Yellen, Fed chair, has been trying to persuade the markets that the central bank will be “data dependent”. The question is, what data? If all that matters is the tightening labour market, rate rises are on the way soon and the dollar bulls are right to be rampaging. Equally, if the slowdown is purely temporary, it should be ignored.

The risk is that traders are overconfident. The Fed could easily drop “patient” policy while making dovish noises: emphasising economic weakness, worrying aloud about the effect of the strong dollar or suggesting a slower pace of future rate rises than economists expect.

The market is unprepared for a dovish Fed. The bet on a stronger dollar is all-encompassing, with speculators having the biggest bets yet on the greenback in the futures markets. Even minor despair could mean big price moves.

james.mackintosh@ft.com

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