It has been a gripping week for financial investors. Donald Trump’s ‘trade wars’ have arguably stolen the headlines and the US President has now officially signed an order raising Aluminium and Steel imports tariffs. However, after all of the noise from the President it appears many countries will be exempt, therefore his threats have diminished slightly, and arguably that is why we haven’t seen major currency fluctuations towards the end of the week.
Also this week the European Central Bank were in the spotlight on Thursday. Interest rates were left unchanged which was to be expected, however they removed the wording ‘easing bias’ from the asset purchasing statement which has led investors to believe that the Quantitative Easing program will be tapered towards the back end of the year and removed before the start of 2019.
In recent weeks the President of the European Central Bank (ECB), Mario Draghi has made it clear that the devaluing US dollar is strengthening the Euro considerably and is a concern, as he doesn’t want the Euro to be overvalued which will halt rising inflation levels. The President did try to talk down the Euro’s position at the interest rate decision by stating the ECB could still increase monthly purchases if needed, however investors have seen past it.
Going into next week, any developments from the 5 Star party in Italy have the potential to influence Euro exchange rates. If the party announce they are close to forming a Government, this could put pressure on the single currency. However this is unlikely. In regards to economic data releases, inflation releases are set to steal the headlines.
US inflation is set to be released on Thursday afternoon at 12:30pm and this will be watched by investors as it could give future direction to how many interest rates hikes to expect this year. At present forecasters are suggesting between 2-4. In addition European inflation is set to be released Friday at 10am. No improvement is expected which is no surprise due to the strength of the Euro at present.