During a speech in London, European Central Bank President Jean-Claude Trichet said that persistent inflation pressures had dissipated in the Euro-zone and that the ECB hasn’t excluded further interest rate cuts as they intend to avoid deflation. Mr. Trichet subsequently clarified that he saw no signs of deflation, and that was important “not to confuse” it with disinflation. Indeed, the former - a sustained fall in prices where the annual change in CPI turns negative - is something that central banks want to avoid like the plague. On the other hand, disinflation - a decline in the rate of increase in average prices - is to be expected, if not desired, given the plunge in commodity prices since the summer. Continued signs of disinflation should allow the ECB to continue cutting rates in light of the global and regional economic slowdown, which is why Credit Suisse overnight index swaps are still fully pricing in 50bps worth of rate cuts by the ECB at their next meeting on December 4. This factor, along with the solid correlation between EUR/USD and the Dow Jones Industrial Average, continues to work in favor of further declines for the euro going forward.