Germany, World’s Fourth Largest Economy, Enters Recession

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The euro dropped on Thursday as Europe’s largest economy Germany was confirmed to be in a recession, while the dollar hit a two-month peak, benefitting from safe-haven demand as worries mounted about a US default.

The latest concern was raised by ratings agency Fitch, who put the United States’ “AAA” debt ratings on negative watch, a precursor to a possible downgrade should lawmakers fail to agree to raise the debt limit.

The greenback has paradoxically benefited from demand for safe havens with only a week left for a resolution to slow-moving debt ceiling talks before the June 1 “X-date”, when the Treasury has warned it will be unable to pay all its bills.

“It has been risk-off this week and that has benefitted the dollar generally,” said Stefan Mellin, senior analyst at Danske Bank.

Escalating signs of economic malaise in Europe sent the euro to multi-month lows against the dollar.

 

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