Kristian Toedtmann, an analyst at Dekabank Deutsche Girozen, said Trichet's opening remarks should be little changed from last month's as he maintains his hawkish stance against inflation. The Q&A, however, will probably have some mention of the upcoming ECB bank lending survey, which Trichet historically likes to give a preview for at the preceding press conference, he said.

"If Trichet says that lending conditions in the euro zone have tightened, the markets will probably take this as a dovish tint and two-year bonds could sell-off," Toedtmann said.

He added that traders are looking for the timing of the bank's next move, which will probably be a rate cut, and consequently one could expect some flattening of the yield curve, Toedtmann said. Nevertheless, he does not expect Trichet to speculate on the timing of the move.

Overall reactions should be fairly muted, said Toedtmann, adding that the German yield curve could be flatter at the end of the day.

"In Europe, inflation seems to be bigger focus than growth," said Eric Lascelles, fixed income strategist at TD Securities. Although weaker economic data in the region might suggest a more forgiving statement on growth, Lascelles does not think the bank will attempt to signal a weaker economic outlook at this time.

Consequently, those hoping for a more dovish statement might be disappointed and one might expect a small move in euribor contracts of the magnitude of one basis point, he said.

Nevertheless, if Trichet does appear to sound more dovish, short-end contracts would move at most, 5 basis points, Lascelles said.

When asked if possible observations on the ECB's bank lending survey could highlight tightening credit conditions, Lascelles said it was possible, but that the market had already priced in worsening credit conditions for the region and that such observations would be ignored in the bond market.

Orlando Green, a fixed income strategist from Calyon bank, said that if Trichet "did emphasize the growth concerns relative to his last press conferences, then it would likely be positive for the short end of the curve but we still think the longer 10 year and plus will be under pressure from inflation concerns."

On the currency side, Paul Mackel, a currency strategist at HSBC Securities Inc-London, said foreign exchange strategists would also be looking for any acknowledgement of weakening, or weaker than expected, economic growth from Trichet at the press conference, as an excuse to sell euros.

"There are some spots in the euro zone economy," said Mackel. "We have seen the euro responding to weaker euro zone data, and if Trichet were to confirm this, the euro would move lower against the USD and pound sterling."

When asked if the euro was already fairly oversold going into the press conference, Mackel said there was some room for the euro to move lower, however he declined to speculate on the magnitude of any moves, saying it would depend on how strong Trichet's statements were.

"We're coming close to some very interesting levels in the euro," he said. If the euro/dollar cross breaks the 1.5350 level we could see some technical selling."

In terms of the pound sterling, Mackel said Trichet could once again single out the pound sterling as an undesired victim of foreign exchange volatility. "Another signalling out of the pound sterling could have an impact and if Trichet were to elaborate on that point it would probably cause a two-way risk in the pound/euro cross and open the door for some losses with the sterling appreciating against the euro," he said.

According to Chris Turner, head of foreign exchange at ING Wholesale Banking, currency strategists will probably be disappointed by a lack of a more dovish speech from Trichet. "In fact, there is a risk of a stepping up anti-inflation rhetoric," he said.

When asked how foreign exchange markets would react to an identical statement to last month, Turner said the euro would pick up between 1% to 2% against the USD. The euro is a bit oversold ahead of the meeting, he said, noting that for the currency to drop aggressively you'd have to see some very dovish commentary from Trichet. He also said the euro could strengthen against the pound by the end of the day.

Turner also said he would not be surprised to hear Trcihet acknowledge that foreign exchange volatility had eased since the ECB's last rate announcement, however he warned that such a statement would probably not be responsible for a rally in the currency.

"We're not relying on the European Central Bank to send any signals of abandoning its hawkish policy stance especially as inflation remains above 3.0%, well outside the reach of the preferred 2.0% ceiling," said Ashraf Laidi, Chief FX Strategist at CMC Markets.

"The other factor underpinning our long term euro bullishness is oil prices," he said. "The fact that OPEC members are able to refer to tangible factors in explaining soaring prices (weak dollar, and general US weakness) reduces the burden on the oil cartel to raise output. In the past, the burden lied entirely on OPEC to increase supply when the culprit of higher prices was speculative activity."

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