The European Central Bank has announced that it will wind down its quantitative easing (QE) programme by the end of 2018. The policy was a support buffer for the Eurozone and nations within the shared Euro currency, but global economic growth has been strong enough for the ECB to decide now is a good time to slowly step back.
The announcement saw the Euro price tumble, trading at €1.14 against the Pound and $1.16 against the Dollar. The Pound had mixed fortunes, as it also fell slightly against the improving US Dollar – down half a percent to $1.33.
Sterling received additional boosts this week in the form of new data from the Office of National Statistics (ONS). Figures from the ONS show an increase in UK employment to 75.6% (approximately 32 million workers), as well as a 4.2% unemployment rate – down 0.4% compared to 2017. UK retail sales were also up by 1.3%; a surprise to economists who only predicted a 0.5% rise. Despite these positive figures UK wage growth slowed back down from 2.9% to 2.8%.
The Eurozone has the difficult problem of having multiple member states with differing economic strengths and weaknesses. Greece has been a big problem for the past few years, with Spain and Portugal threatening a similar outcome, and the latest Italian election difficulties were a big scare. Italy has since stabilised and managed to form a coalition government, but there’s still the problem of their debt repayment.
Aside this, the EU are taking a similar stance to China and implementing tariffs against the United States following President Trump’s import duties on steel and aluminium. The threat of a global trade war has forced the ECB to cut its growth forecast for 2018 from 2.4% to 2.1%. Inflation figures were also adjusted from 1.4% to 1.7% due to rising crude oil prices.
