Euro slipped to a one-week low against the dollar on Thursday after European Central Bank (ECB) President Christine Lagarde warned that a full-scale trade war with the United States could significantly harm the euro zone economy and potentially lead to a surge in inflation. ECB analysis suggests that a US tariff of 25% on imports from Europe would lower euro area growth by about 0.3 percentage points in the first year, she stated. A European response in the form of raising tariffs on US imports would further increase this to about half a percentage point. The brunt of the impact on economic growth would concentrate around the first year after the rise in tariffs; it would then diminish over time, however leaving a persistent negative effect on the level of output, she said. However, ECB analysis indicates that closer integration with the rest of the world could more than offset losses incurred from unilateral tariffs, including retaliation, she noted. EURUSD pair was quoting at $1.0894, down 0.60% on the day. Meanwhile, dollar index was trading higher by half a percent at 103.61.
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