Mark Whistler is the founder of www.WallStreetRockStar.com and is the author of multiple books on trading. Mark's newest book, The Swing Trader's Bible - co-authored with CNBC/Fox News regular guest Matt McCall - will be on shelves in late summer, 2008. In addition, Mark also writes regularly for TraderDaily.com and Investopedia.com.

Sign up for a free trial to Forex Force with Mark Whistler, a twice-daily alert service from professional trader Mark Whistler featuring intraday and swing trading setups. Click here to start your free trial.

1. ECB Holds Rates Steady

The News:
On Thursday, the European Central Bank held the Main Refi Rate steady at 4.0%.

The Breakdown:
The present 4.0% is the product of 200-basis points of hikes since 2005, while also the highest rate seen in about seven years.

What's happening within the Euro zone is quite interesting - when considering the dilemma of current interest rates. In April 2008, the International Monetary Fund (IMF) revised 2008 Euro area GDP down from 1.6% to 1.4%, showing that overall growth is slowing.

However, because the EBB failed to lower rates last year, the euro has appreciated significantly, especially against the U.S. dollar. And, because the euro has rallied so high, the elevated currency is not triggering inflation concerns.

Euro area headline inflation is presently 3.3% (April), which is significantly above the ECB's target threshold. Elevated inflation kept the ECB from lowering rates today, as when rates decline, inflation can pick up. However, with GDP slowing, the ECB will eventually have to lower rates.

The Bottom Line:
The ECB partially created this mess itself, by not lowering rates last year, something that would have likely kept the euro from unprecedented highs, while also curtailing inflation. Now, the ECB is attempting to cool the price of the euro with carefully placed comments to the press in an effort to make room for a rate cut in June.

2. Policymakers Create Currency Volatility

The News:
On the heels of the ECB rate announcement Jean-Claude Trichet held a press conference, which - as usual - moved the euro.

The Breakdown:
In today's post-ECB rate decision, Trichet held a press conference, where he stated,

"On the basis of our regular economic and monetary analysis, we decided at today's meeting to leave the key ECB interest rates unchanged. Inflation rates have risen significantly since the autumn, owing mainly to increases in energy and food prices. As we have said on previous occasions, inflation rates are expected to remain high for a rather protracted period of time, before gradually declining again. The latest information confirms our assessment that upside risks to price stability prevail over the medium term, in a context of continuing very vigorous money and credit growth. At the same time, the economic fundamentals of the euro area are sound, and incoming macroeconomic data continue to point to moderate but ongoing real GDP growth."

Ironically, in the past few weeks, Trichet has also made comments to press that volatility in currency markets is a major problem.

But it's Trichet and other ECB and FOMC policymakers who are creating the volatility with their comments to the press.

In the above statement, Trichet comes right out of the chute with, "Inflation rates have risen significantly since the autumn, owing mainly to increases in energy and food prices. As we have said on previous occasions, inflation rates are expected to remain high for a rather protracted period of time, before gradually declining again. The latest information confirms our assessment that upside risks to price stability prevails over the medium term, in a context of continuing very vigorous money and credit growth."

What this means to currency markets:
Inflation risk is high and while the ECB would like to cut rates, it might not.

What this does to the euro:
Makes it go up.

What a high euro does:
Creates additional inflation in the Euro zone.

The Bottom Line:
Trichet and company - and their comments to the press that drive the euro upwards - are the real inflationary problems in the Euro zone. If the ECB truly wanted the euro to cool, why would they keep emphasizing inflation to the press? Policymakers always have an agenda.

3. Jobless Claims Edge Lower

The News:
Weekly jobless claims edged lower in the past week.

The Breakdown:
In Thursday's report, weekly jobless claims declined from 383 for the week of April 23, to 365 in the week of May 3.

The four-week moving average is sitting at 367,000, and is cooling slightly, which is a good sign for the U.S. economy.

While recessionary worries are still abundant, pressure is slowly leaking from the fear balloon created by the press in past months.

The Bottom Line:
There's still plenty to worry about in the U.S. economy, but the picture has been getting brighter day-by-day.