The minutes from the European Central Bank’s last policy meeting were released yesterday, and cited that global trade tensions could slow Eurozone growth further – a growing and worrying concern of policymakers.
However, despite this the ECB remained largely optimistic about the bloc’s domestic economy and think that the recent growth is enough to withstand any of the risks associated with global trade tensions.
The ECB are still expected to end their bond purchasing scheme this year and according to the latest minutes will look to raise interest rates for the first time since 2008 in the autumn of 2019.
Overall, whilst the message from the minutes was largely optimistic surrounding its policy, the fears and risks associated with global trade are still a concern. Whilst the ECB are on track, I do feel as though current trade tensions, combined with the global stock sell-off seen this week could be a stumbling block for the EU should global growth really stutter.
Next week is set to be a volatile week for the Euro. Firstly, the Italian budget is due to be submitted, whilst Germany goes to the polls for the Bavaria election.
Germans will go to the polls in Bavaria, the most populous state in Europe’s largest economy on Sunday. Bavaria has become a key state in German politics. On Monday morning, analysts will be digesting the results of the election at the same time as Italy submits its 2019 budget to the European Commission.
The Italian budget has been largely to blame for the recent bout of Euro weakness. Currently, Italy and the EU are at loggerheads due to EU guidelines. Italy’s proposed budget would cause debt levels of 0.8% of GDP, which breaches EU guidelines. In essence, if the EU reject the budget plans, which is likely, the Euro could weaken dramatically as the Italian Government and EU go head-to-head.
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