After raising interest rates by 0.25% a month ago, the European Central Bank (ECB) left interest rates unchanged at today's meeting of its Governing Council. The press conference that followed was held in Helsinki; Finland just elected a new government that may block the aid package put together for Portugal. Adjusting to the Nordic spirit of not wasting time with small talk, ECB head Trichet was very much to the point with his answers:

"Nothing New, Nothing Special." Trichet's succinct explanation that no special programs are needed to support Portugal. The ECB is working with an established framework. To this point, Merk Senior Economic Adviser and former St Louis Fed President Bill Poole, recently pointed out, "stressful periods are less stressful if sound institutional arrangements are in place in advance."

"Not a Problem." Trichet's comment on whether the ECB could stomach any losses on its own balance sheet should Greece default on its debt.

"Absolutely Not." Being asked whether ECB policy takes into account the fragility of peripheral countries in setting policy. The ECB focuses on the eurozone as a whole with over 300 million citizens, not on potential issues in any one area.

When asked whether he takes the rising euro into account in setting policy, Trichet agreed it was one of many parameters the ECB looks at. He then went on to read U.S. Treasury Secretary Geithner's and Fed Chairman Ben Bernanke's recent comments in support of a strong dollar policy. Trichet called those comments "important."

Trichet emphasized that all countries must live up to their responsibilities, both weak countries in implementing reform, as well as strong countries in offering support. The press conference was a good example of how to deflect politically sensitive questions; Bernanke may want to watch a replay, given that press conferences may still be a novelty for him.

The euro initiated a sharp selloff as soon as Trichet started speaking, possibly because the ECB did not indicate another interest rate hike was imminent. However, it should be noted that the ECB Governing Council is going to have eight new faces on its 23 member panel in the coming months, with a significant shift towards a more hawkish composition. There will also be a new ECB President later this year, who will have to prove his inflation fighting credentials; a German tabloid recently embraced the most likely candidate, Italian Mario Draghi by depicting him with a Prussian helmet. Combined with inflation indicators that continue to tick up, and it appears that more tightening is, in our assessment, quite likely. For now, however, the market appears to have embraced profit taking with regard to the euro.