US Markets

Euro gains on hopes of German fiscal stimulus

Credit: REUTERS/KAI PFAFFENBACH

The euro rose on Monday after a report that Germany may boost fiscal stimulus increased hopes that governments will act to boost growth in the region, though expectations of further central bank easing kept a lid on gains.

By Karen Brettell

NEW YORK, Sept 9 (Reuters) - The euro rose on Monday after a report that Germany may boost fiscal stimulus increased hopes that governments will act to boost growth in the region, though expectations of further central bank easing kept a lid on gains.

Germany is considering the creation of a "shadow budget" that would enable Berlin to boost public investment beyond the restrictions of constitutionally enshrined debt rules, three people familiar with the internal discussions told Reuters.

Government officials are flirting with the idea of setting up independent public entities that would seize the historic opportunity of zero borrowing costs and take on new debt to increase investment in infrastructure and climate protection, the officials said.

“A key part of that coalition is the commitment to keep balanced budgets. If they are waiving from that it could be very supportive for the euro and very bearish for the dollar,” said Bipan Rai, North American head, FX strategy at CIBC Capital Markets in Toronto.

The euro EUR= gained to $1.1047 against the greenback, up 0.18% on the day, after earlier trading as low as $1.1014.

Euro gains were capped, however, before the European Central Bank’s meeting on Thursday, when the central bank is expected to introduce a new wave of monetary stimulus.

"The default is to be negative euro into ECB," said Kenneth Broux, head of corporate research at Societe Generale.

"Resuming bond purchases won't do anything" to the euro zone economy because "the monetary policy in Europe has stopped being effective," Broux added. "The ECB has done all it can."

The euro may get a boost, however, if the ECB disappoints dovish expectations already baked into the market.

“We get the sense the market is expecting a bit too much of a dovish outcome this week and if that is the case that could imply that tactical long euro positions might do well,” Rai said.

In the U.S., consumer price inflation data on Thursday and retail sales data on Friday are the main economic focus. They will come after the jobs report on Friday showed that U.S. jobs growth slowed more than expected in August.

The Federal Reserve will continue to act "as appropriate" to sustain the U.S. economic expansion, Fed Chair Jerome Powell said Friday in Zurich, bolstering expectations for a rate cut at the Fed's meeting on Sept. 18.

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Currency bid prices at 9:26AM (1326 GMT)

Description

RIC

Last

U.S. Close Previous Session

Pct Change

YTD Pct Change

High Bid

Low Bid

Euro/Dollar

EUR=

$1.1047

$1.1027

+0.18%

-3.68%

+1.1058

+1.1016

Dollar/Yen

JPY=

107.0400

106.9000

+0.13%

-2.92%

+107.0700

+106.7800

Euro/Yen

EURJPY=

118.27

117.86

+0.35%

-6.30%

+118.3000

+117.7500

Dollar/Swiss

CHF=

0.9910

0.9872

+0.38%

+0.98%

+0.9914

+0.9875

Sterling/Dollar

GBP=

1.2361

1.2281

+0.65%

-3.10%

+1.2382

+1.2235

Dollar/Canadian

CAD=

1.3153

1.3170

-0.13%

-3.55%

+1.3184

+1.3150

Australian/Dollar

AUD=

0.6866

0.6846

+0.29%

-2.60%

+0.6872

+0.6837

Euro/Swiss

EURCHF=

1.0951

1.0888

+0.58%

-2.69%

+1.0952

+1.0890

Euro/Sterling

EURGBP=

0.8935

0.8973

-0.42%

-0.55%

+0.9014

+0.8905

NZ Dollar/Dollar

NZD=

0.6437

0.6425

+0.19%

-4.17%

+0.6444

+0.6414

Dollar/Norway

NOK=

8.9268

8.9740

-0.53%

+3.34%

+8.9922

+8.9264

Euro/Norway

EURNOK=

9.8625

9.8975

-0.35%

-0.44%

+9.9085

+9.8513

Dollar/Sweden

SEK=

9.6513

9.6427

+0.25%

+7.67%

+9.6695

+9.6333

Euro/Sweden

EURSEK=

10.6630

10.6362

+0.25%

+3.90%

+10.6655

+10.6241

(Additional reporting by Olga Cotaga in London Editing by Chizu Nomiyama)

((Karen.Brettell@thomsonreuters.com; +1 646 223 6274; Reuters Messaging: karen.brettell.reuters.com@reuters.net))

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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