Trichet repeats that the ECB does not want to breed dependency by the banks on cheap credit and that the ECB will continue to phase out its non-standard monetary measures.

No reaction from the market with EUR/USD steady at 1.3762 as the market wraps up for the week.

The trial balloons are aloft. If they don’t get shot down, these three are likely to fill the vacancies on the Federal Reserve Board.

Trichet sounds like he is going wobbly on ECB collateral rules. If Greece is downgraded another notch by one of the ratings agencies, their debt will no longer be eligible to be used as collateral at the ECB. The ECB also took lots of dodgy asset-backed securities as collateral to give the European banking system a backdoor bailout.

Trichet is confident that the US will start to produce jobs “from now on”. He calls the US productivity jump “incredible”.

More flexibility would be appropriate for China’s currency, he says, saying Europe and the US have the exact  same position on the matter.

Careful not to politicize the yuan, JC…

IMF economist Lipsky says the the dollar is the dominant reserve currency and will remain so for the foreseeable future. The idea of an alternative currency is a topic worthy of study but it it is not a near-term issue, he says.

One interesting factoid from Lipsky: About 50% of US toxic assets ended up on the balance sheets of European banks…

UPDATE Lipsky says Greece has the same rights to IMF help as any member but says the EU has made it clear they want to handle the matter on their own.

EUR/USD is stalled in the low 1.3750s.

All industrialized nations have taken a hit as a result of the financial crisis and all have to take care of their fiscal situation. Instability still exists for all countries and the financial system as a whole, he tells Fox Business.

Regarding inflation, Trichet says prices will likely be at levels that the ECB defines as price stability (just less than 2%).

The Euro inspires confidence and is not in a battle with the dollar, the central banker says.

Trichet says the idea of a EMF deserves examination. Interest rates are appropriate at this time but he warns against a prolonged period of non-standard measures.

• Yellen said to be Obama’s pick for Fed Vice Chairperson
• Angus Reid poll shows Tories stretching poll lead out to 13 points.  This poll has consistently had oppostion with bigger lead over government than other polls
• German February wholesale prices +0.1% m/m, +2.1% y/y vs median forecasts +0.3%, +2.3% respectively
• Russia CBank moves floating rouble band boundary to 34.25vs basket from 34.30 after buying $700 mln – dealers
• China’s Customs Authority:  To keep stable yuan. Disputes about yuan exchange rate are increasingly sharp.  US exports strategy poses threats to China’s goal of maintaining global market share
• Euro zone January industrial output +1.7% m/m, +1.4% y/y, demonstrably stronger than median forecasts of +0.7%, -1.9% respectively
• BOE’s Dale:  Pause in monetary loosening does not mean loosening has come to an end
• ECB’s Provopoulus: Greek GDP to contract around 2% in 2010, austerity steps to hit growth.  Confident Greece will cut deficit below 3% of GDP by 2012

The USD has seen some across the board slippage. Some have cited reports Janet Yellen is Obama’s pick for Fed  vice chairperson as one of the reasons for this bout of weakness. She is a noted monetary dove. In her most recent speech she said the economy will operate below potential this year and next and still needs low interest rates saying “This is not the time to be tightening.” Oh well it’s a reason of sorts I guess.

EUR/USD presently at 1.3765 having started out around 1.3695 and has been as high as 1.3796.   Asian sovereign buying seen early.  We got to around 1.3725/30 where Russia was a notable seller stalling the rally. But not for long.  We were soon through touted sell orders at 1.3730/50, tripping stops just above and making it to just shy of 1.3800 where sovereign sell orders had been cited earlier in the day.

Traders were quick to note a US investment bank putting out a long EUR/USD recommendaton, target 1.4500, stop 1.3500.  The release of demonstrably stronger than expected euro zone industrial output data certainly helped provide underpinning.

Cable up at 1.5155 from early 1.5065, but slightly off session high 1.5172.  Asian sovereign seen buying early.  Market noted the Angus Reid poll showing Tories extending poll lead out to 13 points.  The pairing did swoon when comments from BOE’s Dale hit the wires, the MPC member opining that the QE pause doesn’t mean it has come to an end. We went quickly from around 1.5155 to 1.5135 before recovering just as quickly.

USD/JPY down at 90.45 from early 90.60 having been as low as 90.18 at one stage.

EUR/CHF down on the day. Started around 1.4618 and fell quickly.  It made it all the way to 1.4581 with a Swiss commercial bank a notable seller managing to run through reported  SNB bids in the 1.4590/95 area.  We’re presently at 4588.

USD/CAD sharply lower, down at  session low 1.0157 from early 1.0235, with decent stops tripped on move through 1.0200.  Move coincided with release of latest Canadian jobs data.

Cable little easier on that, presently at 1.5135.

• Timing of stimulus withdrawal will be difficult decision, guided by inflation outlook
• Range of evidence that QE having desired impact, but still long way to go
• Much of impact of QE purchases yet to feed through, we’ll know more over coming year
• Tentative signs that nominal spending in economy is starting to accelerate
• When time comes policy could be tightened by rate hikes, asset sales in any order

Cable has built on earlier gains. It’s been up to session high 1.5170 so far, presently at 1.5155.

MPC’s Dale is scheduled to give speech at 11:00 GMT.

Reports SNB seen on bid down at 1.4593. Presently at 1.4595.

EUR/USD has been up to 1.3728, presently at 1.3722.  Russia has been noted selling in recent trade, but has made little impact so far apart from slightly slowing rally.

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