Euro Rises Amid German Debt Brake Reform

(RTTNews) - The euro strengthened against other major currencies in the European session on Wednesday, as traders reacted positively to news about the German government's plans to increase defense and infrastructure spending.

Germany's chancellor-in-waiting, Friedrich Merz, announced yesterday that the nation's main centrist parties had agreed to establish the infrastructure fund to invest in transportation, energy grids, and housing. Merz also stated that Germany would amend its constitution to exempt defense and security spending from fiscal limits.

Investors were also reacting to comments from U.S. Commerce Secretary Howard Lutnick that President Donald Trump will "probably" announce a deal to reduce tariffs on Canada and Mexico.

Investors are anticipating Thursday's announcement of the European Central Bank's (ECB) monetary policy decision. For the fifth consecutive time, the ECB is almost set to lower its Deposit Facility Rate by 25 basis points (bps). As a result, following the policy meeting, markets will closely monitor ECB President Christine Lagarde's press conference.

In economic news, Eurozone private sector logged a marginal growth in February. The HCOB composite output index remained unchanged at 50.2 in February. The score matched the flash estimate of 50.2. As the index stayed above the neutral 50.0 mark, the figure signaled growth in the private sector.

At 50.6 in February, the service-sector measure was down from 51.3 in January to a three-month low, indicating a loss of growth momentum.

The HCOB Germany Composite PMI was revised lower to 50.4 in February 2025 from a preliminary of 51, compared to 50.5 in January. Service sector business activity growth moderated to 51.1 from 52.5 a month earlier. Manufacturing activity score came in at 46.5, up from 45.0 a month earlier.

The euro held steady against its major rivals in the Asian trading today.

In the European session today, the euro rose to nearly a 4-month high of 1.0696 against the U.S. dollar and nearly a 3-week high of 0.8329 against the pound, from early lows of 1.0602 and 0.8299, respectively. If the euro extends its uptrend, it is likely to find resistance around 1.08 against the greenback and 0.84 against the pound.

Against the yen and the Swiss franc, the euro advanced to near 3-week highs of 159.04 and 0.9496 from early lows of 158.74 and 0.9446, respectively. The euro may test resistance around 162.00 against the yen and 0.95 against the franc.

Against Australia, the New Zealand and the Canadian dollars, the euro climbed to a 7-month high of 1.7039, a 5-year high of 1.8850 and more than a 4-year high of 1.5393 from early lows of 1.6941, 1.8750 and 1.5287, respectively. On the downside, 1.71 against the aussie, 1.89 against the kiwi and 1.55 against the loonie are seen as the next resistance levels for the euro.

Looking ahead, U.S. MBA mortgage approvals data, U.S. and Canada PMI data for February, U.S. factory orders for January and U.S. EIA crude oil data are slated for release in the New York session.