NEW YORK :The euro rallied against the U.S. dollar on Tuesday after Germany’s conservatives and Social Democrats announced proposals to set up a 500 billion euro fund for infrastructure and overhaul borrowing rules aimed at increasing defense spending.
Friedrich Merz, leader of the CDU/CSU conservatives and likely next German chancellor, said the parliamentary group would submit a motion to the Bundestag lower house of parliament next week to amend the constitution so defense expenditure above 1 per cent of economic output is exempt from the debt brake.
“It sends a clear signal that Germany is serious about its defense, it sends a clear signal to Ukraine and at home, it sends a clear signal that Germany is serious about infrastructure spending,” said Holger Schmieding, chief economist, at Berenberg in London.
“This strengthens Europe and should underpin euro gains although there are trade risks to consider.”
The single European currency also gained on news that the Trump administration and Ukraine plan to sign a minerals deal on Tuesday follow a contentious meeting in the Oval Office on Friday between Ukrainian President Volodymyr Zelenskiy and U.S. President Donald Trump.
The euro hit a three-month high of $1.0599. It was last up 1 per cent at $1.0593.
Trump told his advisers he wants to announce the minerals agreement during his address to Congress on Tuesday evening, three sources said, cautioning that the deal had yet to be signed and the situation could change.
