Trillion dollar deficits extending out, purportedly for a decade. A projected $1.6 trillion deficit for next year, fiscal 2011. A higher U.S. national debt ceiling.

And what's the U.S. dollar doing amid the above? Oh, it's trending higher against the world's major currencies.

The dollar early Friday strengthened more than 1 cent versus the euro and British pound, to $1.3607 and $1.5612, respectively, capping a week of impressive gains for the buck.

A word to the wise: Investors should ignore and/or avoid those in the popular press who rush forward with pronouncements about the dollar vis-à-vis the world's other, major currencies.

Sometimes you'll see them on the 24-hour cable news channels at night on FoxNews (NWS), CNN (TWX), and MSNBC (GE). Their research is often simplistic at best, and at times, it's outright wrong.

One common, conventional wisdom articulation concerns the dollar, and it's 'imminent collapse.' Nothing could be further from the truth. But that's the type of flippant conclusion one gets when one uses superficial analysis, as in 'U.S. budget deficit up, U.S. dollar down.'

Where's the dollar headed from here? Well, if you're in the camp that argues both monetary and fiscal stimulus guarantee rising inflation, the dollar will trend lower in the immediate quarters ahead, and probably for longer.

If you're in the camp that argues that given asset destruction, and massive job lay-offs, pricing power is non-existent, the dollar will hold its own against the world's other major currencies.

One of our global partners, Britain, is in an economic tsunami. Here are some recent indicators of the damage being done to Britain's economy:

• The annual rate of decline in industrial output has reached an alarming 12%.
• Manufacturing output fell by 6.4% in three month to January, faster than the 4.9% contraction in the quarter ended in December.
• During the last few months, GDP shrunk by 1.5%. The trends are pointing to a 4% decline in 2009. The last time Britain saw such a sharp decline was in 1931, with a fall of 5%.

When financier George Soros makes a play, traders stand up and take notice. In 1992, Soros made $1 billion by selling the British pound.

Recently, he used the same strategy of betting against the pound. However, when the pound traded below $1.40 last Wednesday, Soros decided to cover his short position. The pound has traded up to $1.4256 against the dollar on Friday. As demand for the pound rose, it had the effect of putting pressure on the U.S. dollar.

The U.S. dollar is considered a "safe haven" currency because it is the world's reserve currency. The Dollar Index contract is traded on the New York Board of Trade. It is traded as a single currency but the actual value of the dollar is based on a basket of currencies. What does this mean in actual trading? Traders usually decide to buy or sell a given currency based on the strength or weakness of the underlying economy for that currency. So when we see a headline: "Pound hits 23 year low on Dollar" it means that on a relative basis the pound is weaker than the U.S. dollar.

You could infer from this headline that the British economy is weaker that the U.S. economy and is the reason why the British pound is the weaker currency.

Trading in the currency markets, however, is not always as clear cut as this example. A host of complex variables go into determining a country's currency including the country's political and financial structure, who the leaders of a given country are and most important what is actually happening within that particular country's economy.

Your take on the July U.S. trade data may very well hinge on whether you tend to see a half-glass of orange juice as a glass half-empty or half-full.

The downside: the U.S. trade deficit increased 5.7% in July to $62.2 billion, the U.S. Commerce Department announced Thursday. Economists surveyed by Bloomberg News had expected a $58.0 billion trade deficit for July.

The upside: the non-petroleum trade deficit in goods declined 9.8% to $29.6 billion -- its lowest level in six years, the Commerce Department said.

Almost all of July's trade deficit increase was due to oil. So, does the July trade statistic constitute a modest victory, or something less?

"It means the nation's trade deficit picture is improving, just as long as we don't use any oil," economist Peter Dawson said. "Kidding aside, the non-oil component of the trade deficit continues to improve, and I'm emphasizing that dimension. The oil import component should decrease provided oil prices continue to moderate and Americans continue to cutback gasoline use, so the trend line at least through Q4 is a good one for the trade deficit."

Overall in July, imports rose 3.9% to $230.3 billion, and exports increased 3.3% to $168.1 billion. Strong performance areas for exports included airplanes, machinery, auto parts, computers and industrial materials.

Oil prices have moved sharply lower this morning, mostly as a result of strong upside in the U.S. dollar. Earlier in the session, oil fell as low as $115.75 a barrel, and is currently sitting at $116.15.

Prices have been dropping since mid July, and today's move comes as the dollar is reacting very positively to the recent decisions of the European Central Bank and the Bank of England to leave their interest rates unchanged. While the dollar still has a long way to go, it is encouraging to see the current rally.

As of today, the euro fell to a five month low versus the dollar, and with the dollar rising against both the British pound, and the Japanese yen, many optimistic analysts are predicting that a long recovery for the dollar is under way.

The dollar fell to a record low against the euro Tuesday morning as traders calculated that U.S. credit market losses will further hurt U.S. economic growth.

The dollar weakened about 1.25 cents to $1.6048 versus the euro before regaining some ground to $1.5995. The dollar also fell one cent versus the British pound to $2.0057 and 1.85 yen to 104.20 versus Japan's yen.

Currency trader Andrew Resnick told BloggingStocks Tuesday the equation is a basic one: with more dollars in supply, each dollar is worth less.

"The Fannie Mae and Freddie Mac assistance packages will require more federal spending or federal support though guarantees. That action, plus FDIC takeover of problem banks means more federal outlays, which weakens the value of the dollar," Resnick said. "We've been in a period of increasing federal outlays for the past five years, although I don't think anyone in 2003 anticipated that federal spending would increase to this degree."

It seems like everyday we are talking about the same news... rising oil prices. Today oil busted through the $135 mark and traded up as high as $135.09. Currently we are seeing oil at $133.91.

There are three main factors at work today helping push prices higher; supply concerns, global demand estimates, and once again, the weak U.S. dollar. Of the three, the weak U.S. dollar has received most of the blame recently for the run up in oil prices.

As we have discussed many times before, any time the dollar shows weakness traders will rush into commodities as a natural way to hedge against the falling dollar. That is exactly what we have been seeing for most of this year, and that has continued into today, as the dollar has continued to drop.

I know that last thing you probably wanted to hear this morning was that oil prices moved even higher, but that is exactly what is taking place, as oil rose as high as $125.98 and is currently trading at $125.60.

Leading the charge today is the weak dollar as investors continue to seek refuge from the falling U.S. currency in commodities -- most notably, oil. The dollar has fallen today against the euro, the British pound, and the Japanese yen. The euro was sitting at $1.5404 last night, but has moved higher today, up to a current price of $1.5466.

The market is also concerned about the upcoming peak driving season for Americans. With the season getting under way, oil prices will definitely continue to rise, and if gasoline stockpiles continue to fall, you can be sure that gasoline prices are also going to keep moving higher over the next couple of months. Will we see national averages of $4 or greater? I don't think so, but at the current rate prices are moving, nothing is out of the question right now.

Oil stocks continue their impressive charge today with several of the big names trading up to hit new yearly highs. Oil has managed to trade up $0.70 to $72.89 and briefly was able to break through the $73 mark to hit a high on the day of $73.10.

According to a story today on CNNMoney.com a big reason for oil's recent surge can be attributed to large inflows of new money into the oil market. It cites a new report from Citigroup (NYSE: C) that estimates that roughly $10 of this year's upward move can be traced back to the influx of new money this year. "Financial players have now firmly moved ahead as the main near-term driver of oil prices," Citigroup said.

Another factor that is definitely involved, but rarely mentioned, is the impact that the weakening dollar is having on oil prices. The dollar has definitely been struggling lately, and just today it was announced that the Euro hit an all time high against the American currency. The Euro climbed to $1.37 today which is the highest in its history, and the British pound has been trading at around a 26 year high against the dollar for the past couple weeks.