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Focus On Trichet

Focus On Trichet - The European Central Bank on Thursday left its key lending rate unchanged at a record low 1%, as expected, but investors are focusing on ECB President Jean-Claude Trichet’s upcoming news conference for any sign the central bank will take action to address Europe's sovereign-debt crisis.

To avoid disappointment, Trichet will need to at least announce that the central bank is extending its fixed-rate, long-term refinancing operations through the first quarter of next year, strategists said.

But investors are also looking for Trichet to signal that the ECB intends to step up purchases of distressed euro-zone sovereign bonds, possibly even announcing a numerical target for purchases.

Those expectations spurred a short-covering rally in the previously hard-hit peripheral euro-zone bond markets, narrowing yield spreads between the periphery and benchmark German bunds. It also allowed the cost of insuring debt issued by the likes of Spain, Portugal and Italy against default to retreat sharply from record levels.

The euro also bounced back from a two-month low below $1.30. The euro /quotes/comstock/21o!x:seurusd (EURUSD 1.3161, +0.0024, +0.1827%) changed hands at $1.3175 versus the dollar, up from around $1.3160 ahead of the announcement for a gain of around 0.4% from Wednesday but below the intra-day high at $1.3217.

Focus On Trichet
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