Summary of ECB Monthly Press Conference

The ECB decided to maintain its key policy rate at 1% in October, a move widely expected. As always, the focus of the market was the ECB press conference, in which Mr. Trichet, the head of the ECB, communicated the latest monetary developments.

Even though the main themes of the press conference were similar to the one seen in the preceding months, Mr. Trichet acknowledge that some signs of stabilization had appeared and that the economy was out of the free fall that had characterized the last two quarters. Still, he said caution was needed to maintain a steady recovery.

This was one of the first times that Mr. Trichet acknowledged any signs of stable recovery, but his comments had little effect on the currency market, as the economic recovery is already priced in -- even, perhaps, overpriced in current market valuations.

The Q&A session went smoothly, with Mr. Trichet avoiding the significant questions, especially those referring to the currency market. However, he did speak about the strong dollar policy that the U.S. Treasury is pursuing. This was the second time in more than two years that Mr. Trichet has referred to the currency market, making similar comments in the previous press conference in September.

In an ironic twist, as Mr. Trichet said that the strong dollar policy is important for the world economy, the euro surged 50 pips to set a new high for the day, in the 1.4800 area. Shortly afterward, though, the euro started heading lower, in line with the other major currencies.