LIVE MARKETS-Is the euro strength a sign of 'assertiveness'

Welcome to the home for real-time coverage of markets brought to you by Reuters reporters. You can share your thoughts with us at markets.research@thomsonreuters.com

IS THE EURO STRENGTH A SIGN OF 'ASSERTIVENESS'?

Yesterday, the single currency recorded its biggest daily rise in 1-1/2 months as remarks from EU Commission President Ursula von der Leyen and German SPD supported expectations for a sharp increase in fiscal spending.

The macro backdrop in the euro area hasn't changed much in the last few days, with inflation dropping just a bit less than expected and not affecting expectations for ECB rates policy.

Furthermore, some analysts say it cannot be taken for granted that hundreds of billions of euros of more debt in Europe will positively impact the single currency.

"It may take a few more weeks to see Europe assert itself, however, given its dependency on Germany's internal compromises around a new defence fund or loosening its 'debt brake," says Thierry Wizman, global forex and rates strategist at Macquarie.

"But if and when that happens, it will likely be good for the euro."

"Assertiveness -- by a country or region, as in this case -- is usually a condition for a stronger currency," he adds. "It may mark the beginning of European exceptionalism, alongside American exceptionalism."

MUFG pulled its forecast for the euro to drop below parity, flagging that optimism over a ceasefire in Ukraine and a step up in government spending in Europe supported European currencies.

Deutsche Bank around a week ago turned neutral on the euro and said it saw upside risks from a possible material shift in German fiscal policy.

"We do have our doubts about the merits of buying the euro on this narrative (more defence spending in Europe)," said Chris Turner, forex strategist at ING.

(Stefano Rebaudo)

EARLIER ON LIVE MARKETS:

VOLATILITY POPS, STOXX DROPS CLICK HERE

BEFORE THE BELL: TARIFF WOES, DEFENCE POINTS HIGHER CLICK HERE

NEW TRUMP TARIFFS TAKE EFFECT, EU ALSO IN CROSSHAIRS CLICK HERE