EURUSD Rose
What’s happening: The euro recorded gains against the US dollar after Germany’s parliament approved a landmark spending package.
What happened: The EUR/USD forex pair has been on a strong uptrend since US President Donald Trump entered the White House.
Apart from Germany’s spending plans, the euro was also supported by positive data releases.
EUR/USD continues to climb near 23-month high
Why it matters: The German parliament’s lower house passed a landmark spending package that could increase debt financing by hundreds of billions of euros, especially for defence and infrastructure.
The legislation, which marks a big step away from Germany’s fiscal conservatism, was proposed by conservative Chancellor-in-waiting Friedrich Merz. The plan, approved on Tuesday, marks a change in the country’s constitutional borrowing rules that would allow future governments to take on higher debt.
The surge in spending is expected to revive Germany’s struggling economy and increase military spending. The legislation will now move to the upper house, which will vote on Friday.
The euro rises significantly against the dollar
Data released on Tuesday also lent support to the EUR/USD pair. The ZEW Indicator of Economic Sentiment for Germany surged to 51.6 in March, from 26 in the previous month. The figure hit the highest mark since February 2022 and topping market estimates of 48.1.
The Eurozone’s ZEW Indicator of Economic Sentiment also rose by 15.6 points to 39.8 in March, notching the strongest reading in eight months and exceeding estimates of 39.6.
Speculations of the European Central Bank aggressively cutting interest rates have eased. Markets now expect only two rate cuts by the ECB this year, in April and June.
The EUR/USD pair gained around 0.2% to 1.0946 on Tuesday, after jumping to its strongest level since October 10 earlier in the session.
Euro Rises Against Dollar
What to watch: Investors await data on inflation rate (1400 UAE Time), wage growth (1400 UAE Time) and labour cost index (1400 UAE Time) from the Eurozone today. The Eurozone’s annual inflation rate is expected to decline to 2.4% in February, from a six-month high of 2.5% in January.
The US Federal Reserve, which started its policy meeting on Tuesday, is scheduled to announce its policy decision and new economic estimates today (2200 UAE Time).