According to the most recent GDP data, Germany’s largest economy has unexpectedly entered a technical winter recession, causing the euro to weaken further against the US dollar.
Buyers are finding little reason for optimism in the current risk-averse environment, with two consecutive negative quarters, the official definition of a recession.
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Meanwhile, investors’ concerns about the US debt ceiling remain, leading to increased market jitters. The lack of a deal has prompted Fitch ratings agency to place the United States on negative watch for a possible downgrade, adding to the already tense atmosphere surrounding the ongoing debt ceiling talks.
Market participants will be watching several European Central Bank (ECB) speakers closely in the coming day to see if they address the recent German GDP report, which could potentially affect the hawkish narrative that has been prevalent recently.
The main high-impact event in the United States will be the release of US GDP figures, which will be accompanied by the Fed’s Collins.
The FOMC minutes from yesterday’s meeting did not bode well for the euro, as many officials were considering either a pause or another interest rate hike at the June meeting. Looking ahead, the possibility of additional rate hikes remains open if necessary.
This emphasizes the importance of today’s GDP figures as well as tomorrow’s core PCE price index, durable goods orders, and Michigan consumer sentiment.
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