The Fed has been on 'autopilot' with its monetary tightening so that even bouts of weaker data, such as we saw after hurricane Katrina, failed to divert the Fed off course. But now, following the minutes of the December meeting, it is clear that policy will become more data dependent.

But clearly any view on the Fed now is dependent on how the data comes through and hence we can expect the dollar to be a bit more volatile on data releases, starting with Friday's payrolls.

The Fed is sticking to its guns,

Some of the U.S. data has been a bit weaker. A slowdown puts into question more rate rises there.

We don't see any indication that the Fed would have caused to start talking more tolerantly about monetary policy. And we don't think the bond market has any particular reason to go down to lower yield levels.

Worse still, there are ominous signals from the U.S. that the ECB might not have a willing ally in the Republican Party, if the GOP gets its feet under the desk at the Oval office on Nov. 7, ... Bush's chief economic advisor Lawrence Lindsey suggested that the U.S. was wrong to intervene on behalf of the euro.