Dollar Climbs as German Spending and Fed Meeting Stir Economic Waters

The dollar gained strength against the euro as Germany's parliament approved significant spending and the Federal Reserve convened to discuss potential policy changes. Despite the euro initially rising with improved German investor morale, the dollar's upward trend persisted amid cautious market movements anticipating major geopolitical and economic developments.

The dollar strengthened against the euro in trading on Tuesday, following the German parliament's green-lighting of extensive spending measures and as the U.S. Federal Reserve commenced its March policy meeting. The euro, down by 0.2% at $1.0915, had earlier peaked at $1.0954, its highest since October 10, before retreating.

According to Michael Brown, a senior research strategist at Pepperstone, the currency movement reflects a typical 'buy the rumour, sell the fact' reaction. "The dollar has been on an upward trajectory against its peers, aiding this downturn," Brown stated.

Germany's decision marks a departure from long-standing fiscal conservatism, intending to boost economic growth and military expenditure to strengthen European defense. The euro's earlier rise was attributed to better-than-expected German investor morale in March. Currency markets remain cautious amid pending developments on a Russia-Ukraine peace deal and central bank policies.

(With inputs from agencies.)