Steve Barrow Fed Quotations

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.

If the Fed pauses at 4.5 percent, the risk would be the Fed has stopped too early and they would have to restart the tightening process. That would be a big supporting factor for the dollar.

We've seen some selling earlier this week, but a good number will show the general strength of the U.S. economy and help the dollar. Payrolls will be the key indicator as far as the Fed is concerned.

Fed speakers are saying they are going to be vigilant on inflation and if the data suggests they haven't done enough, they will do more. It's a short-term buying opportunity for the dollar.

This is perhaps the closest any Fed official has come to suggesting the peak on rates for now.

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.

Any thoughts that the Fed may end the tightening process are likely to be dashed and that will probably support the dollar.

The focus next year will again be on the Fed -- we expect Fed funds to go up to 5 per cent, higher than levels priced into the markets.