The euro's value increased against the dollar in the afternoon, which is facilitated by the eurozone GDP report for the fourth quarter, as well as the weakening of the dollar due to the fall in the yield of US bonds.
So, the EUR/USD pair adds 0.39% and reaches the level of $1.1895.
The increased demand for the euro is largely due to the reports that were released in Europe, which showed that the GDP of the EU countries in the fourth quarter of 2020 (according to the final estimate) decreased by 4.6% in annual terms. Analysts had assumed that the reduction would be at the level of 4.8%. In other words, at the end of last year, the European economy experienced slightly smaller losses than previously expected.
Long positions on the euro were also supported by the prospects for a recovery in the European economy amid the German government's unveiling of plans to dramatically speed up the vaccination campaign.
Nevertheless, analysts of one of the largest financial organizations UniCredit say that the euro will significantly fall against the dollar again soon. The sell-off of the euro will be directly related to the expectations of market participants of the planned meeting of the European Central Bank. And it will take place next Thursday, so the rise in the quotes of the EUR/USD pair observed today is a short-term phenomenon. Many market players tend to assume that short positions on the EUR/USD pair are still preferred in the run-up to the ECB meeting.
It is likely that at the ECB meeting, the heads of central banks will put forward the idea of additional support measures for the European economy and will voice not the most optimistic forecasts for its growth. All this will ensure a reduction in the value of the euro and the EUR/USD pair.
Analysts are also confident that the ECB will not change the base rate and will leave it at a record low of zero. Market participants are also very interested in the parameters of the PEPP asset purchase program, which were kept unchanged in January. Today, their volume is 1.85 trillion euros and will remain the same until the end of March 2022.
