Yet again, the U.S. consumer has phenomenal resilience and is not being swayed by the employment numbers coming out.

We haven't yet seen the negative effect of gas prices on consumer spending. It's certainly not here in these numbers. That doesn't mean it's not there. Certainly the weekly retail sales numbers have been sluggish.

What the current deficit does is make the dollar vulnerable. It means we could see a vicious cycle, where a declining dollar makes U.S. assets less attractive to foreign investors, which weakens our assets further, which puts further pressure on the dollar.

Given that the economic data will be strong, people will wonder why the Fed is not moving, which could cause some volatility in the markets. But we think the Fed will remain on hold for quite some time.

We've seen markets get ahead of themselves in bonds and in currencies as well. There are signs that markets have now gotten too optimistic about not only the size of the U.S. recovery, but the speed; our medium-term forecast is still very much of euro strength and dollar weakness.

I don't think there is a tremendous amount the Fed can do, but they can't stay on the sidelines. Unless the data stream improves, they have to cut rates.