“EUR-USD has fought its way to the area just above 1.3700. This illustrates once again to what extent the euro zone debt crisis is a thing of the past for the FX market, as the government crisis in Italy did not even cause the slightest bit of uncertainty on the FX market. That means that with its promise of unlimited purchases of bonds issued by crisis countries the ECB has successfully averted attention away from the (fiscal) policy of the peripheral countries. Markets now seem to be interested in a completely different matter: the real economy.
The tenacious EUR strength found support on this front on Friday as euro zone GDP for Q4 came in slightly above expectations at 0.3% qoq. Even if this is far from strong growth at least it is a positive result which is a notable improvement compared with recent years. In view of the slightly improved result the ECB is likely to stick to its growth forecast. Should the positive economic trend persevere, thus leading to an improved outlook there is a possibility of the ECB ignoring the uncomfortably low inflation.
As a result the data published on Friday has slightly lowered the likelihood of further expansionary ECB measures. So the continued EUR strength mainly depends on the data published until the next ECB meeting in March.”