EUR/USD tumbles to two-month low amidst US debt-ceiling concerns, strong US economic data

• EUR/USD hits a two-month low amidst US debt-ceiling uncertainty and positive US economic data.
• Fitch places US “AAA” debt rating on negative watch despite lower unemployment claims and a rise in Q1 GDP.
• Germany’s Q1 GDP plunge puts additional pressure on the Euro, with central bank commentary stirring markets.

EUR/USD continued to fall for three straight days and reached a new two-month low of 1.0707, as the greenback remains strengthening across the FX board. Uncertainty around the US debt-ceiling discussions and upbeat US economic data bolstered the US Dollar (USD). Therefore, the EUR/USD is trading at 1.0725 after hitting a high of 1.0756.

German recession adds weight to falling Euro, as central bank comments stir sentiment

US debt-ceiling discussions resumed on Wednesday, with US GOP House Speaker Kevin McCarthy saying that he does not expect an agreement today, tough added there has been “some progress” between both parties. Woes of a potential US default bolstered the US Dollar, though Fitch Ratings warned that US “AAA” debt ratings were put on negative watch.

On another front, data from the US Bureau of Labor Statistics (BLS) revealed that unemployment claims for the last week rose by 229K below estimates of 245K, signaling a solid labor market. At the same time, growth in the US for the first quarter was upwardly revised, revealing the BLS. Gross Domestic Product (GDP) rose by 1.3%, against the preliminary 1.1% figure, portraying a solid economy.

On the Eurozone (EU) front, the largest economy of the bloc, Germany, was in recession in Q1 as GDP plunged 0.3%, weighing on the Euro (EUR), which extended its losses from 1.0740 toward the 1.0710 area.

In the meantime, central bank speakers crossed the wires on both sides of the Atlantic. On the US front, Boston Fed President Susan Collins commented that the time to pause its tightening cycle is getting closer. On Wednesday, the Fed revealed its May minutes, showing policymakers are leaning towards pausing hikes, though officials did not commit to writing off interest rate increases.

Across the pond, the European Central Bank (ECB) member Klass Know said that “at least” two more rate hikes of 25 bps are needed in the Euro Area and stressed the need to stay put for a significant time.

EUR/USD Technical Levels