The European Central Bank is set to hold steady amid heightened risks of a trade war

The ECB is expected to achieve a more balanced tone this week, given the increased uncertainty for the global economy.

The focus will be on the ECB's assessments of these risks at its meeting on Thursday, with investors worried about the risk of a trade war escalation.

"We expect Mario Draghi to strike a balanced tone at the press conference on July 26 - not too aggressive or too moderate," said Mark Wall, chief economist at Deutsche Bank.

The ECB recently said it would not change interest rates for next year to counter trade risks and high volatility and to avoid unjustified tightening of financial conditions.

The risks now are that the ECB pays off its monetary stimulus at a time when the economy can move down. For now, ECB seems convinced that the region's economy will remain sustainable.

"Despite the uncertainty surrounding global factors, including the threat of increased protectionism, the risks associated with the eurozone growth outlook remain broadly balanced," Draghi said at a hearing in the European Parliament on July 9th.

The new economic data, released Tuesday, showed lower readings of business activity in the region. The Purchasing Managers' Index recorded a surprising drop in the services sector, but there was a better reading of the manufacturing industries.

Source: CNBC

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