President Barack Obama began the European leg of his journey in Dresden, Germany, where he met with Chancellor Angela Merkel and turned the conversation from America's relationship with the Muslim world back to the world economic issues.

"We continue to work closely together to confront the global economic crisis -- the downturn knows no borders -- to move forward," Obama said.

But it is still Thursday's speech on U.S.-Muslim relations that is grabbing the most attention.

The President expressed his support of a Palestinian state, scolded Iran for pursuing its nuclear ambitions, and challenged Muslims to fight extremism.

In Baghdad, people were saying "Muslims don't want only words, we want deeds."  

The sentiment was echoed in Kabul and in the Palestinian territories where one sentence resonated more than any other: 

Obama's pledge that the United States does not accept the legitimacy of continued Israeli settlements.

"I hope in the next few months, President Obama will lay a real plan," said Chief Palestinian negotiator Saeb Erekat.

However, one Israeli had a different take on Obama's speech.

"I think he is trying a little bit too hard to win over the Arab world," he said.

On Saturday, Obama visits Normandy to commemorate the 65th anniversary of D-Day.