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ECB warns of trade war, euro exchange rate

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The European Central Bank warned last month of the risks surrounding a potential trade war with the U.S. and the impact of the euro’s exchange rate on euro area inflation, ECB minutes released today showed.

The minutes for March’s policy meeting stressed that there was widespread concern that “the risk of trade conflicts, which could be expected to have an adverse impact on activity for all countries involved, had increased.”

Regarding the euro’s strength, which is largely due to fears of the U.S. protectionism, the ECB said the exchange rate remained a key source of uncertainty, where the exchange rate appreciation could be expected to have a more negative impact on inflation.”

Policymakers were debating how to wean the bloc off easy money and prepare investors for normalizing policy after nearly ten years of the global financial crisis.

As of 12:10 GMT, the euro widened its losses against the U.S. dollar to a low of 1.2314 after opening today at 1.2365.

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