The US and the European currencies in the EUR/USD pair found a relative balance on Friday. However, it was not simple – the US dollar experienced a collapse, so the Euro can follow its example.
Today, the price of the US dollar increased against other main currencies as part of the correction. Analysts stated that the national currency managed to take revenge after failing for three consecutive sessions. During the day, the EUR/USD pair was seen around the level of 1.1954, slightly losing its positions.
A decline in the yield on 10-year US government bonds from the earlier 1.6% to 1.53% resulted in the US dollar's weakening at the start of the week. At present, this indicator is still at a low level. On Thursday, the price of the US dollar is steadily decreasing, although the ECB already decided to raise the purchase of bonds.
In turn, the Euro currency also went through a difficult time. Its volatility accelerated this week, which is mainly because of the European regulator's actions. In particular, they kept interest rates at the same level – the base rate on loans is still at zero, and the rate on deposits is at -0.5%. At the same time, the ECB announced a clear growth in the rate of buying up assets on its balance sheet. The volume of this program remained at the current level (€1.85 trillion). Experts believe that this will help the European economy to reduce the negative impact of external factors.
Following the ECB's decision, the Euro currency sharply increased, reaching the level of 1.1970. However, it slightly plunged to 1.1950 a little later. Currently, it continues to move in this range, trying to exit from it.
Analysts were wondering about the existing actions of the ECB to raise the rate of bond purchases in the next three months. Currency strategists at HSBC Bank are almost sure that the regulator's actions should make investors happy, especially since the European currency is showing stability based on the current data.
ING Bank experts agree with their colleagues, adding that the ECB's decision to counter the growth of government bond yields will help the euro increase. In view of this, the EUR/USD pair is expected to move up, supported by Europe's economic recovery in the second quarter of 2021.
Nomura Bank, in turn, believes that the US dollar will lose its positions in the event of such a scenario. According to the bank analysts, the price of the national currency will fall in the second quarter of this year amid the stabilization of US government bond yields. Nevertheless, the situation may change for the better by the end of the year. In the third and fourth quarters of 2021, the US dollar will stabilize if the Fed's quantitative easing (QE) program will be curtailed.
