- EUR/USD hits two-month lows amid debt ceiling uncertainty and positive US economic data.
- Fitch places the “AAA” US debt rating on negative watch despite lower jobless claims and rising GDP in the first quarter.
- Germany’s first-quarter GDP plunge puts additional pressure on the Euro as comments from central bankers roil markets.
EUR/USD continued to fall for three straight days and hit a fresh two-month low of 1.0707 as the US dollar continues to strengthen across the currency board. Uncertainty surrounding the debt ceiling discussions and upbeat US economic data boosted the US dollar (USD). Therefore, the EUR/USD pair is trading above 1.0725 after reaching a high of 1.0756.
The German recession aggravates the fall of the Euro
Discussions over the US debt ceiling resumed on Wednesday, with Republican House Speaker Kevin McCarthy saying he does not expect a deal today, though adding there has been “some progress between both parties. Fears of a possible US default lifted the dollar, although Fitch Ratings warned that the “AAA” US debt rating was on negative watch.
In a different vein, data from the US Bureau of Labor Statistics (BLS) revealed that jobless claims last week increased by 229,000, below estimates of 245,000, a sign of solid working market. At the same time, growth in the US for the first quarter was revised up, the BLS revealed. The Gross Domestic Product (GDP) rose 1.3%, compared to a preliminary 1.1%, portraying a solid economy.
On the Eurozone (EU) front, the largest economy in the bloc, Germany, entered recession in the first quarter, with a 0.3% drop in GDP, which weighed down the Euro (EUR), which extended its losses from 1.0740 towards the 1.0710 zone.
Meanwhile, central bank spokesmen made statements on both sides of the Atlantic. In the US, the president of the Boston Fed, Susan Collins, commented that the time to pause its tightening cycle is getting closer and closer. On Wednesday, the Fed released its May minutes, showing policymakers favoring a pause in raising rates, though they did not commit to ruling out rate hikes.
On the other side of the pond, the member of the European Central Bank (ECB), Klass Know, affirmed that “at least” two more increases in rates of 25 basis points are needed in the euro zone and stressed the need to remain unchanged for a significant time.
EUR/USD technical levels
Source: Fx Street
I am Joshua Winder, a senior-level journalist and editor at World Stock Market. I specialize in covering news related to the stock market and economic trends. With more than 8 years of experience in this field, I have become an expert in financial reporting.
