The euro has surged, surpassing $1.08 for the first time in four months, as investors hope that expansionary fiscal policy and increased defense spending will help revive the Eurozone economy .

In Germany, the Christian Democratic Union (CDU/CSU) and the Social Democratic Party (SPD) – the parties that won the recent election – reached an agreement to relax strict borrowing rules, in order to increase defense spending to more than 1% of GDP. In addition, the two parties agreed to set up an extra-budgetary fund worth 500 billion euros to invest in infrastructure projects over the next 10 years.

Meanwhile, European Commission President Ursula von der Leyen recently announced a plan to strengthen the European defense industry, which could raise nearly €800 billion. She also proposed easing fiscal rules for member states to support defense investment, and providing €150 billion in loans to support these efforts.

On monetary policy, the European Central Bank (ECB) press conference will be held tonight (8:15 p.m. Vietnam time). Investors are leaning towards the possibility of the ECB cutting its operating interest rate by 25 basis points, marking the sixth reduction since the transition to an easing cycle starting in 2024. This move will take the benchmark deposit rate to 2.5%, the lowest level since early 2023. In addition to the interest rate announcement, investors will look for signals regarding the ECB's policy outlook for the rest of the year, especially as economic conditions have changed since the last meeting.

Trade tensions have escalated following moves by the US administration under President Trump. Although no specific tariffs on the EU have been announced, the possibility of them being imposed soon is a concern. In addition, in the current context, European countries will increase defense spending, especially Germany, in response to the US decision to cut military support for Ukraine and Europe.

Further monetary easing by the ECB could put pressure on the euro in the near term, but capital is currently flowing into the region on expectations of strong fiscal policies.

ECB's operating interest rate adjusted down from mid-2024

The DXY index measures the strength of the USD against the currencies of six major trading partners of the US. The euro (EUR) is the main reason for the decline of the DXY index. At one point, the DXY index fell to 104 points - a four-month low. In addition, traders are waiting for the monthly employment report next Friday, after ADP data revealed that the US private sector added only 77,000 jobs in February 2025, marking the lowest increase in the past seven months.

The cooling of the USD has supported the downward trend of exchange rates at banks in the past three days. At Vietcombank, the exchange rate is listed at 25,300 VND/USD (buying by transfer) and 25,660 VND/USD (selling). Meanwhile, in the free market, the USD is still inching up with the selling price at some stores being 25,885 VND.

Source: https://baodautu.vn/dong-euro-cham-dinh-4-thang-ky-vong-vao-chinh-sach-tai-khoa-mo-rong-cua-chau-au-d251295.html