Euro Climbs on German Infrastructure Plans, Dollar Struggles After Tariff Reprieve

Image Credit: Reuters

The euro continued to climb, hitting a four-month high against the U.S. dollar on Thursday, following a rise in European bond yields triggered by Germany's proposed 500 billion euro ($539.85 billion) infrastructure fund and changes to borrowing limits.

The U.S. dollar remained near a four-month low against a basket of major currencies, as U.S. President Donald Trump's administration granted a one-month delay on auto import tariffs for Canada and Mexico, highlighting the ever-changing trade landscape. The British pound and Australian dollar both gained, with the pound reaching its highest level in four months, while the Aussie hit a one-week high, buoyed by strong domestic economic growth and additional stimulus pledges from China. The Chinese yuan also traded near a nine-day high offshore.

"The moves in European markets were remarkable, as Germany finally used its substantial balance sheet," said Kyle Rodda, senior financial markets analyst at Capital.com. He added that U.S. trade policy remains the biggest uncertainty, though the exemption for auto tariffs "raised hopes that rational decision-making prevails in the White House."

Germany’s bond yields surged as investors processed the additional borrowing for the country's debt overhaul, with 30-year yields rising by up to 25 basis points. The euro was steady at $1.0792 in the Asian morning, having touched $1.0803 earlier, the highest since November 8.

The euro has risen nearly 4% this week, on track for its best performance since March 2020. However, all eyes will be on the European Central Bank's policy decision later, with a quarter-point rate cut expected, but the focus will be on the potential pace and scope of further easing.

Sterling reached $1.2906, its highest point since November 11. Meanwhile, the U.S. dollar index remained largely unchanged at 104.31, having dipped to 104.25 overnight, the lowest since November 8.

The dollar gained 0.2% against the yen, trading at 149.17 yen, while it rose 0.1% to 7.2438 yuan offshore, after having fallen 0.9% in the previous two sessions. The Aussie also gained 0.1% to $0.6345, its highest since February 26.

In China, the National People's Congress began its annual meeting on Wednesday, signaling increased efforts to boost consumption and protect economic growth amid escalating trade tensions with the U.S. Meanwhile, the White House walked back some of Trump's tariff announcements, granting a one-month exemption on auto tariffs for Canada and Mexico, contingent on their compliance with an existing free-trade agreement.

The U.S. dollar eased 0.1% to C$1.4327, its lowest since February 27, and also fell by a similar margin to 20.3933 Mexican pesos.

 

 

 

 

Paraphrasing text from "Reuters" all rights reserved by the original author