Hawkish Outlook From ECB's Trichet Turns The Euro From Early Losses

Hawkish Outlook From ECB's Trichet Turns The Euro From Early Losses
Thursday May 8, 7:08 pm ET By John Kicklighter, Currency Analyst

Before ECB President Jean Claude Trichet would cross the wires with his persistently hawkish outlook for monetary policy, the euro was on the retreat across the board Thursday morning. The European session was dotted with disappointing German trade and factory activity data. The industrial production number for March proved to be the most discouraging with a 0.5 percent contraction that met expectations for the sharpest contraction in 11 months - helped specifically by a remarkable 12.3 percent tumble in construction activity. Aside from these indicators, top event risk was naturally the ECB rate decision. While the policy body held rates unchanged at 4.00 percent as expected, President Trichet’s public address quieted speculation of an impending dovish turn. In his remarks, the policy maker said inflation was the group’s “highest priority” and that risk was clearly to the upside. He further suggested data pointed to moderate, ongoing growth and that financial market turmoil was putting little constraint on lending with money and credit growth “still vigorous.”