Investors will be focused on the reaction of the European Central Bank (ECB) to mounting trade tensions when its president Mario Draghi unveils its latest monetary policy decision on Thursday.
No change in interest rates or other monetary tools is expected at the latest meeting, but economists are focused on whether the ECB will adjust its guidance for the path of interest rates.
At its last meeting the ECB surprised economists by announcing the end of quantitative easing, the massive programme of bond-buying it started in an effort to stimulate inflationary pressure and growth. The ECB said it will reduce the pace of asset purchases from €30bn (£26.4bn) per month to €15bn from September to December, before halting new purchases completely.
Read more: European Central Bank announces end of quantitative easing
However, since the meeting in June the US has doubled down on its policy of introducing tariffs on imports from some of the worlds largest economies, including China, Canada, and the EU.
Economists almost universally believe the tariffs will harm global growth, adding a key uncertainty for monetary policymakers.
The ECB previously said it will not raise interest rates until at least the summer of 2019. Jennifer McKeown, chief European economist at Capital Economics, said that low inflationary pressure will likely prompt a slower pace of tightening.
She said: “The continued weakness of core inflation supports our view that rate hikes will not be justified before next September.”
Investors will watch the language around the balance of risks facing the Eurozone economy, according to Reinhard Cluse, Europe chief economist for UBS. Draghi and ECB economist have previously said the risks are “broadly balanced”; “The question is whether the ECB has turned more sceptical in the meantime,” Cluse said.
Read more: Draghi to resist pressure on more hawkish tilt towards quantitative easing
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