Weaker U.S. Economy Makes U.S. Dollar Stronger
Normally, when economic reports are weak the exchange rate of the currency of that country falls, yet as is reported here, currency traders reacted by pushing the U.S. dollar higher against the pound and the euro (though not against the yen).
This might seem strange, but it's not if you remember what I wrote last week about the link between stock markets and the yen. The U.S. has short term interest rates at zero and so they can't be lowered further in response to economic weakness. The ECB still has rates at 2% so they can be lowered by 2 more percentage points. And since a weaker U.S. economy increases the risk for a weaker European economy, a weaker U.S. economy will increase the risk of more ECB interest rate cuts, which will lower the interest rate differential.
One argument sometimes used for floating exchange rates is that the currencies of weak economies will weaken which will boost that economy by supporting exports. Yet as we see here, once interest rates reach zero, the effect will be the opposite, and a weaker economy will cause the currency to rise in value and so hurt exports.