The fact that it's actually shrinking gives the dollar a short-term boost.
If the data starts to taper off, the market will begin to handicap a 5 percent top in interest rates. That would weigh heavily on the dollar.
Katrina's effect was far less destructive than initially feared. The true extent of the damage, however, may not be known until next month when the Labor Department will make adjustments to this preliminary reading,
Reserve diversification by central banks has been a key driver of dollar weakness this year.
Comments from various Japanese authorities suggest that the zero interest rate policy may remain in place longer than the market anticipates.
Euro-dollar dropped about 40 points in the aftermath of the release but recovered some of the loss, reflecting the market's uncertainty about the veracity of the figures.
The residual impact from the Fed is definitely positive for the dollar. The Fed message is clearly all systems go for 4.25 percent and maybe even 4.5 percent, which will increase the dollar's interest rate differential with other currencies.
Speculators took the words as a signal that China with its massive $760 billion of U.S. dollar reserves may move to diversify some of its assets into euros.
As oil prices go below $60 per barrel, it should translate to yen strength. I think we are far closer to a top in dollar/yen and it is reasonable to expect a turn in the pair.
The yen remains the preferred funding currency for carry trades. The Swiss franc was the alternative and now it's become less attractive.
This 'man in the street' poll of barbers, taxi drivers and waiters offers some of the best clues to future Japanese consumer spending.
For a long time now the Eco Watchers Survey has been our favorite gauge of Japanese consumer sentiment.
The interest rate differential will be materially larger. It will attract a lot of capital into U.S. dollars.
The Canadian dollar is relentless moving forward. You also have very steady economic growth and a strong commodities cycle.
If you have a continuation of gains in commodities prices, the Canadian dollar will rise. There is some positive momentum going on for the Canadian dollar.
The euro has been the victim of an ever widening interest-rate differential to the dollar, a dynamic that has hurt the currency over the past six months as the carry spread now stands at 175 basis points against it.
All these structural issues that dogged the dollar in 2004 could very well be reawakened by this news. The tone will be clearly dollar negative.
The ECB is trying to walk a very fine line between its mandate to control the budding inflationary pressures in the euro-zone and its desire to nurture the nascent economic recovery in the region where the unemployment rates stands at nearly 10%.
The country's 7.25% short term rates - the highest in the industrialized world - are choking economic demand with many analysts now predicting the possibility of a recession in 2006.
The market has really begun to believe that we are coming to the close of the zero interest rate policy.
