The euro remained relatively stable around $1.09, close to its highest point since early November, against a backdrop of German fiscal policy adjustments, geopolitical uncertainties, and evolving expectations regarding European Central Bank (ECB) monetary policy. Investors are navigating trade tensions, the Ukraine conflict, and adjusting their forecasts for ECB rate cuts.
- The euro was little-changed at $1.09, near its strongest level since November 5th.
- Germany’s parliament approved increased government borrowing, including changes to debt rules.
- The deal includes exempting defense spending from debt limits and a €500 billion infrastructure investment plan.
- The plan now goes to the Bundesrat for a vote on Friday.
- Investors are monitoring the trade war and the conflict in Ukraine.
- Expectations for ECB rate cuts have been scaled back to two reductions, likely in April and June.
- Interest rates are no longer expected to fall below 2%.
The currency’s resilience appears tied to several factors. Germany’s fiscal policy changes, particularly the significant infrastructure investment, may be perceived as supportive for the Eurozone economy. Simultaneously, revised expectations for ECB rate cuts, suggesting a less dovish stance, could be bolstering the euro. However, ongoing global risks, like trade disputes and geopolitical conflicts, continue to exert influence, creating a complex environment for the asset.