Euro Surges Amid New German Defense Fund and Minerals Deal with Ukraine

The euro appreciated against the U.S. dollar as Germany's CDU/CSU and Social Democrats proposed a €500 billion fund to enhance infrastructure and revised borrowing rules to boost defense spending. Coupled with a planned minerals agreement between the U.S. and Ukraine, the euro reached a three-month high.

The euro advanced against the U.S. dollar on the back of Germany's political parties proposing a significant infrastructure fund and modifications to borrowing regulations aimed at increasing defense spending. Friedrich Merz of the CDU/CSU, poised to be Germany's next chancellor, announced plans to move a motion in parliament proposing constitutional changes for defense expenditures.

Holger Schmieding, chief economist at Berenberg in London, remarked that these moves emphasize Germany's commitment to defense and infrastructure, signaling positively to Europe and the global market. The euro's rise also reflects news of a prospective minerals agreement involving the Trump administration and Ukraine.

The euro surged to a three-month high, buoyed by the dual developments concerning German fiscal policies and an anticipated U.S.-Ukraine minerals deal. President Trump is eager to unveil the minerals agreement during his congressional address, though the plan remains subject to finalization.

(With inputs from agencies.)