Euro‑Dollar Surges: A Big Move for Europe
EUR/USD has kept climbing this week, marking a 3 % jump – the biggest weekly gain since November 2022. Meanwhile, GBP/USD is riding a 6 % wave from its January low.
Why the Euro Is on a Roller‑Coaster
- The US economy slowed down, tightening the dollar’s appeal.
- Europe has just hacked its fiscal rules, opening the floodgates to spending.
The European Commission just unlocked about €800 bn through a new escape clause in the Stability and Growth Pact. In Germany, a pact between the CDU/CSU and the SPD has created a €500 bn infrastructure fund and revamped the debt brake, letting the country spend freely on defence.
The Moment Germany Is Turning the Page
This is a watershed for Germany. It signals that Europe is ready to abandon its “fiscal shackles” that caused underinvestment and slow growth.
Will It Push Germany From a Drag to a Driver?
It won’t be an instant miracle, but it is a step in the right direction. Challenges still loom:
- High energy prices.
- Hit from Chinese competition.
- Trump’s economic war against allies.
On the flip side, extra spending could weaken fiscal sustainability. Germany can borrow more, but France and Italy face tighter budgets, so a fiscal risk premium might curb a stimulus‑fuelled rally.
The U.S.–Europe Gap Shrinks
The story that pushed the dollar to multi‑year highs only two months ago is still alive, but it’s cooling a bit. Trump’s rapid policy changes and the endless trade uncertainty chill businesses and dampen consumer spending, while Europe’s big fiscal stimulus could turbo‑charge its post‑pandemic recovery.
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