Bernanke Beaten To "The Punch" By ECB's Trichet?

When central bankers speak, markets listen. That's why we're all waiting for Fed Chairman Ben Bernanke's comments on the economy at 1 p.m. today.

But it looks like European Central Bank President Jean-Claude Trichet beat him to the punch. Trichet today said the ECB is ready to move pre-emptively to counter inflation and that risks are on the upside in the eurozone. That jolted the euro which was up sharply on the comments. It has since backed off a bit but still is stronger.

"Our assessment of upside risks to price stability has been fully confirmed," Trichet told a news conference. Earlier, the ECB had said it was leaving rates unchanged.

Andrew Busch, global foreign exchange strategist for BMO Capital Markets, said Trichet's comments were perplexing. "This underscores how bpipolar these guys are in their policy. They did a massive add in December and they're telling us in January they are tightening," said Busch. "It's still direct opposition of what's going on in the United States. It'll be interesting to see what Bernanke says.

Below is a note Busch--a CNBC contributor--sent us earlier today on Trichet and other thoughts:

"Oops, he did it again. ECB head Trichet's comment that the central bank was not in neutral and that they were in a tightening bias. It's astounding that the ECB can be pumping in money to their system and at the same time say that they are in a monetary tightening mode. Dr. Phil where are you?

This surprising comment has triggered a 100 rally in the euro and took out stops above 1.4750. Essentially, we just did the range of the last 3 days in an hour. EurJpy went from 160.70 to 161.30. This seems to have stopped out the weak shorts and market should take a breather.

This should mean European equities get sold and we may see US equities outperform should monies shift here.

One quick comment about the GS (Goldman Sachs) call for a US recession: didn't they just release their outlook for 2008 and state, "We expect economic growth to decelerate, recession unlikely"? Clearly, their models are heavily driven by the employment data, but doesn't this seem a bit too myopic as they overweight the most recent data? If next months numbers are better than expected, will they revise? NBER's Feldstein says recession not a sure thing, but says chance of recession now more than 50%.

Poole's comments show the hawkish side of the Fed and we'll see where Bernanke sits at 1 PM ET today. Rumor yesterday that the Fed would go early and go 50."

Questions? Comments?