The euro rebounded to the $1.05 mark, approaching Monday’s one-month high of $1.0528, fueled by optimism over increased fiscal spending in Germany following reports that Europe’s largest economy is considering a €200 billion emergency defense fund.
Euro gains towards one-month high
The proposed package aims to bolster Germany’s military capabilities and enhance national security, aligning with broader European efforts to respond to geopolitical uncertainties.
In addition, Friedrich Merz (CDU), Germany’s soon-to-be chancellor, has not dismissed the possibility of reforming the debt brake to finance key measures, including tax relief, lower energy prices, and a substantial increase in military spending. Such reforms could provide additional fiscal flexibility, potentially boosting economic growth and investor sentiment.
Investors analyzed key speeches from European Central Bank officials
Meanwhile, investors analyzed key speeches from European Central Bank officials ahead of next week’s policy meeting, where the ECB is widely expected to cut interest rates for a fifth consecutive time. ECB policymaker Joachim Nagel suggested that further rate cuts remain on the table if inflation continues to ease toward the 2% target, reinforcing expectations of continued monetary easing. However, his colleague Isabel Schnabel told the *Financial Times* that the ECB is nearing a point where it may need to pause or halt rate reductions, citing concerns about the potential risks of excessive monetary stimulus.
Market participants remain focused on economic data releases and global risk sentiment, with the euro’s trajectory likely to be influenced by upcoming inflation reports, geopolitical developments, and central bank guidance.
