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As expected the European Central Bank decided to leave the Minimum Bid Rate unchanged at 1.25%. The focus moves to the press conference with Jean-Claude Trichet. The Euro rises a few pips, within a narrowing range.

EUR/USD traded at around 1.4830 before the release, right in the middle of the 1.4775 to 1.4882 range that has been seen in the past week. Any dips or breaks higher were very short lived. Last month, an important breakout was seen many hours before the rate decision. This time, the markets are more tense, with hardly any moves in the past hour.

In the last meeting, the president of the ECB, Jean-Claude Trichet, used the code words “closely monitoring”, signalling a pause after the rate hike that was announced then. Indeed, Trichet and other ECB members tend to communicate the expectations very well, and they don’t surprise the markets. So yet again, Trichet lived up to the expectations.

But there is no consensus in the markets regarding the next hike, will it happen in June or July – “strong vigilance” means earlier, in June, while a repeat of “closely monitoring” means later, probably July. There are various factors for both ways. See the ECB Preview for more.

One factor that weighs for a rate hike only in July or later on is the very fresh report of German factory orders – they plunged by 4%, when a rise was predicted. The German locomotive can slow the whole train, and the ECB, thought to be leaning towards German interests, may respond with a pause.