The euro surged against the U.S. dollar on Tuesday following Germany’s announcement of a bold new economic initiative.
The country’s conservative and Social Democrat leaders proposed a €500 billion fund aimed at revitalizing infrastructure and overhauling borrowing rules to boost defense spending. This development, coupled with news of a U.S.-Ukraine minerals deal, drove the euro to a three-month high.
Friedrich Merz, leader of the CDU/CSU conservatives and the frontrunner to become Germany’s next chancellor, revealed that his parliamentary group plans to submit a motion to the Bundestag next week.
The proposal seeks to amend the German constitution, allowing defense expenditures exceeding 1% of economic output to be exempt from the country’s stringent debt brake.
READ ALSO: Zelensky Seeks to Mend Ties with Trump Amid U.S. Aid Freeze
“This sends a clear signal that Germany is serious about its defense,” said Holger Schmieding, chief economist at Berenberg in London. “It also signals to Ukraine and domestic stakeholders that infrastructure spending is a priority. This strengthens Europe and should support the euro, though trade risks remain.”
The euro’s rally was further fueled by reports that the Trump administration and Ukraine are set to sign a minerals deal on Tuesday. This follows a tense Oval Office meeting on Friday between Ukrainian President Volodymyr Zelensky and U.S. President Donald Trump.
As a result, the euro climbed to $1.0599, marking its highest level in three months, before settling at a 1% gain at $1.0593.
Discover more from Scoop Hub
Subscribe to get the latest posts sent to your email.