This week's top newsmaker is Federal Reserve Chairman Jerome Powell.
On Tuesday, the head of the US central bank made it clear that in the foreseeable future, the regulator is not going to raise interest rates or curtail the asset purchase program.
He also noted the lack of significant progress in achieving the goals of the central bank.
Powell dismissed concerns that Washington's fiscal largesse would cause US inflation to accelerate. According to him, any increase in consumer prices in the country in the coming months is unlikely to be strong or permanent.
As for the central bank's other mandate (full employment), the Fed chairman stressed that ten million Americans are still out of work.
Powell's dovish comments, as it seemed, should have plunged the USD. However, after touching six-week lows (around 89.9 points), the greenback was able to recover to 90.3 points.
Experts still disagree on the future prospects of the US currency.
Some believe that the faster pace of vaccination in the United States will make it possible for the national economy to recover faster than other leading economies, which in turn will support the dollar.
Others argue that the United States, facing the greatest losses from the coronavirus than any other country in the world, will take longer to get in shape. In the long run, this will require more monetary easing by the Fed and erode the value of the USD.
Keeping the Fed's policy unchanged promises to push up treasury yields in the coming months, putting pressure on risky assets and lending a helping hand to the greenback.
Despite Powell's rather "soft" comments, the euro failed to gain much against the US dollar. First of all, this is due to recent statements by European Central Bank President Christine Lagarde, who said that the regulator is very closely monitoring the growth of European government bond yields. Investors fear that the central bank may take steps to lower the single currency and bond rates.
In addition, the pace of deployment of the vaccination campaign against COVID-19 in Europe still lags behind the United States, and AstraZeneca has dealt another blow here. The British-Swedish company said that it will deliver only 90 million doses of the vaccine to the EU in Q2 – half of the previously estimated volume. This is the second such delay in the delivery of vaccines to the region. Earlier, similar statements were made by Pfizer and Moderna.
The EUR/USD pair rose to almost 1.2180 on Wednesday, amid the release of positive reports from Germany, but then it pulled back.
According to data from Destatis, in October-December, German GDP grew by 0.3% q/q, rather than 0.1% as previously reported.
Market participants seem to be more interested in the situation that will develop in the spring than in the winter indicators.
The EUR/USD pair is still falling in front of the 1.2170-1.2180 area, which is a strong resistance. The pair should form a short-term low above 1.2190 to move to annual highs in the 1.2345-1.2355 region.
Meanwhile, 1.2090 should contain the fall. Its breakdown will result in retesting levels 1.2050 and 1.2020.