Euro Surge: German Deal Fuels Fiscal Hopes

The euro gained nearly 0.5% recently, driven by developments in Germany where parties are negotiating a fiscal deal likely to enhance defense and stimulate growth. An agreement could lead to massive infrastructure investment and alterations in borrowing rules, dispelling previous market concerns about Germany's state borrowing increase.

The euro surged on Friday amid growing optimism over a historic fiscal agreement among German political parties. The deal is expected to boost defense spending and reignite growth in Europe's top economy. The euro climbed 0.49% to hit $1.0902, showing positive movement against other currencies such as the British pound and Swiss franc.

Friedrich Merz, Germany's Chancellor-in-waiting, has secured a preliminary agreement with the Greens to increase state borrowing. This has heightened hopes ahead of next week's parliamentary vote. Merz is pushing for a 500 billion euro fund aimed at improving infrastructure and revising borrowing regulations, a move that has alleviated market skepticism about Germany's fiscal ambitions.

In Japan, wage talks concluded with companies agreeing to a 5.46% pay hike, the largest in 34 years, though short of union goals. The yen weakened slightly, while broader markets await the Bank of Japan's next steps amid global uncertainties. The British economy's unexpected contraction led to a dip in the pound, with the dollar index experiencing fluctuation following U.S. political developments.

(With inputs from agencies.)