The euro remains near its strongest level in months, holding steady around $1.09. This stability comes amid significant developments, including Germany’s approved increase in government borrowing for infrastructure and defense, alongside evolving expectations for ECB monetary policy. Investors are also weighing geopolitical tensions and the trade war’s potential impact.
- The euro is little-changed at $1.09, near its highest since November 5th.
- Germany’s parliament approved increased government borrowing, including a €500 billion infrastructure plan.
- Defense spending is exempted from Germany’s debt limits.
- The deal now goes to the Bundesrat for a vote.
- Investors are monitoring the trade war and the conflict in Ukraine.
- Expectations for ECB rate cuts have decreased, with only two reductions now priced in.
- Rate cuts are anticipated in April and June.
- Interest rates are not expected to fall below 2%.
The euro’s current position reflects a complex interplay of factors. The approval of significant German government spending, particularly focused on infrastructure, may bolster confidence in the Eurozone economy and currency. Reduced expectations for aggressive ECB rate cuts further contribute to the currency’s relative strength. However, ongoing geopolitical uncertainties, such as trade disputes and the conflict in Ukraine, continue to inject an element of caution into the market.