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.
"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 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.
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