Euro fell in European trade on Wednesday against a basket of major rivals, giving up five-month highs against the US dollar and on track for the first loss in four days on profit-taking.
The German Parliament officially approved the constitutional amendment that would allow the government to increase spending massively, which would boost inflationary pressures in the eurozone’s biggest economy.
The decline also comes as investors shun risks before the Federal Reserve’s policy meeting in 2025, expected to maintain interest rates unchanged.
The Price
The EUR/USD pair fell 0.2% today to $1.0922, with a session-high at $1.0946.
The EUR/USD pair rose 0.2% on Tuesday, the third profit in a row, hitting a five-month high at $1.0954 as the German Parliament voted in favor of the financial stimulus plan.
German Stimulus
The German Parliament officially approved major financial reforms, thus ending decades of fiscal conservatism in a step aimed at boosting economic growth and military spending.
The new package includes 500 billion euros for infrastructure spending, while massively expanding military spending as the US withdraws its military support.
The plans are expected to boost the growth rate to about 2.1% by 2026, with the spending divided over 12 years.
European Rates
Reuters reported the European Central Bank policymakers see an increasing probability of a hiatus in the cycle of interest rate cuts at the next meeting, before resuming later on.
Traders reduced the odds of an ECB April rate cut to less than 50%.
The Fed
The Federal Reserve is wrapping up its second 2025 policy meeting, widely expected to hold interest rates unchanged.
The Fed will provide clues on the path ahead for US interest rates amid mounting economic risks, and especially Trump’s tariffs.
