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What’s happening: The euro recorded gains against the US dollar after Germany’s parliament approved a landmark spending package.
What happened: The EUR/USD forex pair has been on a strong uptrend since US President Donald Trump entered the White House.
Apart from Germany’s spending plans, the euro was also supported by positive data releases.
Why it matters: The German parliament’s lower house passed a landmark spending package that could increase debt financing by hundreds of billions of euros, especially for defence and infrastructure.
The legislation, which marks a big step away from Germany’s fiscal conservatism, was proposed by conservative Chancellor-in-waiting Friedrich Merz. The plan, approved on Tuesday, marks a change in the country’s constitutional borrowing rules that would allow future governments to take on higher debt.
The surge in spending is expected to revive Germany’s struggling economy and increase military spending. The legislation will now move to the upper house, which will vote on Friday.
Data released on Tuesday also lent support to the EUR/USD pair. The ZEW Indicator of Economic Sentiment for Germany surged to 51.6 in March, from 26 in the previous month. The figure hit the highest mark since February 2022 and topping market estimates of 48.1.
The Eurozone’s ZEW Indicator of Economic Sentiment also rose by 15.6 points to 39.8 in March, notching the strongest reading in eight months and exceeding estimates of 39.6.
Speculations of the European Central Bank aggressively cutting interest rates have eased. Markets now expect only two rate cuts by the ECB this year, in April and June.
The EUR/USD pair gained around 0.2% to 1.0946 on Tuesday, after jumping to its strongest level since October 10 earlier in the session.
What to watch: Investors await data on inflation rate (1400 UAE Time), wage growth (1400 UAE Time) and labour cost index (1400 UAE Time) from the Eurozone today. The Eurozone’s annual inflation rate is expected to decline to 2.4% in February, from a six-month high of 2.5% in January.
The US Federal Reserve, which started its policy meeting on Tuesday, is scheduled to announce its policy decision and new economic estimates today (2200 UAE Time).
Context: Japan’s Nikkei 225 jumped more than 1% to around a three-week high on Tuesday, surpassing the 38,000 mark.
Details: Japan’s Nikkei 225 breached the key 38,000 resistance level for the first time since February 27 but pared some gains later during the session.
Shares of the largest domestic trading houses rallied on Tuesday, after a regulatory filing showed that Warren Buffet’s Berkshire Hathaway increased its holdings in five Japanese trading houses.
Shares of major trading houses, including Mitsui and Mitsubishi, climbed sharply on Tuesday. Shares of Mitsui and Mitsubishi climbed more than 4% on Tuesday.
Markets in Japan continued to extend gains this morning, with the Nikkei 225 adding more than 250 points as investors assessed the latest economic reports.
Data released this morning showed Japan’s exports growing 11.4% year-over-year in February, accelerating from 7.3% in the previous month. Japan’s imports fell 0.7% year-over-year to a two-year low of ¥8,606.63 billion, compared to market expectations of a 0.1% rise.
Japan posted a trade surplus of ¥584.5 billion in February, versus a year-ago deficit of ¥415.43 billion.
What to watch: Investors await the release of inflation data from Japan on Friday. The annual inflation rate in Japan, which accelerated to 4.0% in January from 3.6% in the previous month, is expected to increase further to 4.2% in February.
Other Markets: European indices closed higher on Tuesday, with the FTSE 100, DAX 40, CAC 40 and STOXX Europe 600 Index up by 0.29%, 0.98%, 0.50% and 0.61%, respectively.
Russia’s President Vladimir has agreed to halt attacks on energy facilities in Ukraine for 30 days after a phone call with US President Donald Trump. The news sent the RUB/USD pair lower in forex trading this morning.
Australia’s Westpac-Melbourne Institute Leading Economic Index rose 0.1% in February, the same pace as in the previous month, lending support to the AUD/USD forex pair.
New Zealand’s Westpac McDermott Miller Consumer Confidence Index fell to 89.2 in the first quarter, from 97.5 in the previous period, sending the NZD/USD pair lower in forex trading this morning.
Colombia’s leading economic indicator rose 2.65% year-over-year in January. This being a slowdown from the 2.95% surge recorded in the previous month exerted pressure on the COP/USD forex pair.
The American Petroleum Institute said that US crude oil inventories rose by 4.593 million barrels in the week ending March 14, after a gain of 4.247 million barrels in the previous week, sending the WTI crude oil prices lower this morning.
South Africa’s inflation rate (1200 UAE Time) and retail sales (1500 UAE Time), US MBA mortgage applications (1500 UAE Time), EIA crude oil stocks change (1830 UAE Time), EIA gasoline stocks change (1830 UAE Time), EIA distillate stocks change (1830 UAE Time), EIA heating oil stocks change (1830 UAE Time), India’s M3 money supply (1530 UAE Time), Mexico’s aggregate demand (1600 UAE Time), Russia’s PPI (2000 UAE Time), as well as Argentina’s balance of trade (2300 UAE Time) and GDP growth rate (2300 UAE Time).
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