Forex - Euro in focus before Trichet testimony

LONDON (Thomson Financial) - The euro was firmly in focus as markets await the imminent testimony from Jean-Claude Trichet, president of the European Central Bank (ECB).The ECB left interest rates on hold at 4.00 percent on Thursday, a decision fully expected by markets because of the bank's inflation concerns. The euro was little changed, continuing a gradual drift higher against the dollar and the pound.The key focus, however, is on Trichet's press conference, which investors will comb though for any signs the ECB is softening its tone on inflation. Ashraf Laidi, chief FX analyst at CMC Markets, said: "We certainly do not expect Trichet to temper the bank's persistent hawkish stance as oil prices surge to new highs."Instead, he may shed a little more attention on the emerging signs of weakness, such as euro zone retail sales," he said.Laidi predicted the euro would weaken even without a softer tone from Trichet, because markets are revising their expectations for euro zone interest rates going forward.Euro zone CPI inflation remained way above target at 3.3 percent in April, albeit down from 3.6 percent in March, and continued inflation pressures are expected to keep ECB rates on hold for some months to come. However, many analysts are penciling in cuts later this year as economic indicators turn lower.Indeed, data are beginning to reveal cracks, with German industrial production figures earlier on Thursday showing a 0.5 percent drop in March from February. Euro zone retail sales earlier in the week were also soft.Elsewhere, on currency markets, the pound was steady, benefiting little from the Bank of England's (BoE) widely expected decision to keep interest rates on hold at 5.00 percent.After gaining a brief fillip from the decision, because markets had priced in some chance of a cut, the pound quickly settled back to previous levels, with many analysts expecting the bank to deliver a quarter-point in June."It seems odds-on that the Bank of England will trim interest rates from 5.00 percent to 4.75 percent in June, thereby maintaining the trend of cutting by 25 basis points every two months," said Howard Archer, chief UK economist at Global Insight.Later on, markets will also look at data out of the United States.Initial jobless claims are expected at 370,000 for the week ending May 3, from 380,000 last time, while continuing claims are also seen edging down.Meanwhile, wholesale inventories are expected to increase just 0.5 percent from the previous month's 1.1 percent gain.London 1157 GMT London 0805 GMTU.S. dollar yen 104.16 up from 103.84Swiss franc 1.0546 down from 1.0556EuroU.S. dollar 1.5366 up from 1.5334yen 159.99 up from 159.22Swiss franc 1.6206 up from 1.6188pound 0.7853 up from 0.7852PoundU.S. dollar 1.9568 up from 1.9523yen 203.69 down from 203.76Swiss franc 2.0624 up from 2.0612Australian dollar U.S. dollar 0.9419 up from 0.9390pound 0.4814 up from 0.4809yen 97.99 up from 97.56