ForexLive US Wrap: Trichet, Bernanke Take it Easy; Obama Next Up

ECB leaves rates unchanged at 1.5% Trichet: Risks to economic growth are on the downside; uncertainty high; ECB staff downgrades forecasts US weekly jobless claims rise to 414K US Trade deficit tumbles to $44.8 bln in July from $51.6 bln in June; narrower deficit prompts upward revision to US Q3 GDP forecasts Chinese Vice FinMin Zhu: Open to all investment opportunities in UK Polish FinMin: No way euro can survive an Italian debt crisis Bernanke: Fed has range of tools and is prepared to use them; Fed will do all it can to restore high rates if growth and employment; policy makers should not disregard economy's fragility S&P 500 falls 1% to 1186 US 10-year note closes 6 bp lower at 1.98% yield Talk is cheap, so we got a lot of it today and we will get more of it tonight when POTUS steps into the House Chamber with TOTUS to lay out how he plans on lowering the 9.1% unemployment rate. The day began with mixed US economic news as jobless claims rose but the US trade deficit contracted a remarkable 13% in one month (beware next month's revision...)  and was quickly followed by dovish comments from the ECB's Trichet. The outgoing ECB chief reversed the ECB's bias from tighter policy to easier policy just two months after ratcheting up rates for the second-time this year despite a hellacious  European debt crisis. Unimpressed, the market slide from 1.4040 to 1.3943. We tried to establish a toehold on rebounds above 1.4000 but failed and EUR/USD fell sharply at midday in NY, reaching 1.3875 despite a relatively dovish Bernanke speech. Equity traders were upset that Bernanke did not pre-announce what the FOMC will do when it meets in two weeks. That prompted a stock dip and a round of risk aversion which only undermined the euro further. EUR/USD closes below the 50% retracement of the 1.2860/1.4940 rally today for the first time and below its 200-day moving average (1.4024)  for the first time in 8 months. Likewise, the USD index closes above its 200-day avg (0.7621) as well, for the first time in a year. A 1.3850 no-touch, rumored to expire tomorrow, is said to be in play... The across-the board nature of the dollar rally leads one to conclude that strategic dollar shorts have been being covered since around midday today. Cable rallied strongly from near important trend support at 1.5907 to 1.6082 late in the London session, helped by the BOE looking more hawkish than the ECB by doing and saying nothing at today's meeting. Comments from a Chinese official that the crown jewels would look pretty good in the Forbidden City (not really) prompted the rally while technical resistance and dollar-index covering prompted a sharp slide back to 1.5951. USD/CHF marched higher today as EUR/CHF held its ground despite European chaos. Trichet did not endorse the SNB move but said the ECB understood it. USD/CHF reached 0.8770 at mid afternoon. Commodity currencies generally gave ground amid slight risk aversion prompted by the ongoing Greek travails.