Flash Comment: Trichet was almost light-hearted

 Trichet seemed slightly more positive today than at previous press conferences. Hedid not introduce any new non-standard measures and did not express concern aboutthe latest market developments.

 In a gesture of confidence, he said that market observers have been too pessimistic onthe capacity of EU authorities to take necessary decisions.

 Trichet noted that the need for intervention in the government bond market has beendiminishing and that it looks like a trend. Sterilisation will continue.

 We expect that the ECB will cautiously stay on the exit path and we still anticipate afirst hike in H2 11.

 If there is a significant negative market reaction when the stress tests are revealed on23 July, the ECB will stand ready with the appropriate instruments.

 The market reacted with EUR/USD trading higher, a steepening of the EONIA curveand increasing European stock prices.