The ECB will leave rates on hold at 1145 GMT but it is Trichet's 1230 presser that holds the key. Firstly, with markets pricing in no further interest rate rise this year, his verbal contortions will be scrutinized for coded suggestions that that may be the case, or that the ECB is still in tightening mode.
Trichet 'closely monitoring' inflation will suggest the rate tightening cycle has further to go.
More important will be any hint that the ECB could intervene to buy Spanish and Italian government bonds, reviving a programme that has lain dormant for 18 weeks. Some in the ECB are not keen on the scheme, preferring to put the onus on euro zone governments.
Weber's opposition to it pretty much cost him his career as a central banker and Weidmann, his successor at the Bundesbank, is not thought to be much keener. When it was initiated last year, Trichet denied any such idea had entered his head only four days beforehand.
Nonetheless, with no other obvious policy option available for several weeks, the ECB may be forced to act or allow the euro zone to slide into its most serious crisis yet. Bank exposure to Italy in particular dwarfs anything tied to Greece, Portugal or Ireland.
To have maximum effect - and to put some fear into the fear-greed dynamic that drives markets - the ECB could even act without warning. If it did so in sufficient size, it could scare them off for long enough for policymakers to get their act together. But that's a big if.
Intervention is alive and well elsewhere.
The Swiss cut already near-zero rates to weaken the safe-haven Swiss franc yesterday and Japan intervened on its own to curb the yen today, knocking it down sharply. Both currencies have soared as investors took fright at what is going on in the euro zone and United States. If the ECB sticks to the sidelines while others act, it is not hard to guess what will happen to peripheral bonds.
The other big setpiece is a Spanish bond auction of up to 3.5 billion euros of paper, which will get away but probably at much higher yields. Economy Minister Salgado said last night there was no question of pulling the sale.
Investors are piling on the pressure and Barroso let the cat out of the bag yesterday, saying investors now doubted the euro zone's capacity to deal with the crisis -- a startling admission.
Rules of thumb vary but it is clear that 10-year yields at 7 percent or above are unsustainable for either Italy or Spain. They both peaked at well over six percent yesterday.
(writing by Mike Peacock; editing by Janet McBride)
Keywords: EUROZONE/SNAPSHOT
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