Again this was probably to be expected. Trichet has a reputation for being an inflation fighter, and may not have felt inclined to drop the interest rate, which would have been the only important thing he could have done. They're obviously still banking on a stronger recovery than I can see coming. OTOH, if you effectively can't do anything it may be better to cover your tracks as carefully as possible.
The euro surged more than 1 percent against the dollar and yen after European Central Bank President Jean-Claude Trichet said the euro's 22 percent gain in the past year won't prevent the region's exports from increasing. Trichet's comments led traders to erase bets he would use today's press conference to signal concern about the pace of the euro's advance. Within half an hour of the remarks, the euro had jumped almost two cents from the day's low.
"He's not looking too concerned about the euro -- the market's taking him at his word,'' said Steven Englander, chief foreign exchange strategist in New York at Barclays Capital Inc. With this kind of signal, "you sell dollars,'' he said. Against the dollar, the euro rose to $1.2766 at 1:23 p.m. in New York from $1.2631 late yesterday, according to EBS prices. It rose to a record $1.2812 Tuesday and has climbed to all-time highs on nine of the past 16 trading days. Compared with the yen, the euro had its biggest percentage since November, rising to 135.58 from 134.10.
``Although recent exchange-rate developments are likely to have some dampening effect on exports, export growth should continue to benefit from the dynamic expansion of the world economy,'' Trichet said. He spoke after the ECB's monthly meeting, at which policy makers kept their benchmark interest rate at 2 percent.