Euro Strengthens Amid German Fiscal Deal

The Euro surged on news of a German fiscal deal aimed at boosting defense and reviving Europe's largest economy, while the U.S. dollar faces mixed movements. Inflation expectations increase in the U.S., and Japan experiences its largest wage hike in decades, reinforcing the Bank of Japan's stance.

The Euro made significant gains on Friday as German political parties reached a fiscal deal to potentially enhance defense spending and economic growth in Germany, Europe's largest economy. The U.S. dollar saw gains against the Swiss franc and yen, buoyed by hopes of avoiding a government shutdown and rising inflation expectations.

Friedrich Merz, Germany's incoming chancellor, secured pivotal support from the Greens to increase state borrowing, with a massive infrastructure fund and borrowing rule changes at stake. Meanwhile, increased U.S. inflation worries and changes in fiscal policies globally are impacting currency markets, with the Euro showing resilience against the dollar, pound, and franc.

The dollar index fell 0.11%, reflecting mixed trends as markets anticipated a hawkish ECB stance in April amid economic uncertainties. The pound showed fluctuations after an unexpected contraction in the UK economy, while Japan's significant wage hikes could influence the Bank of Japan's monetary policy.

(With inputs from agencies.)