After consolidating for most of the late North American and early Asian session the EURUSD finally broke through the psychologically key 1.3500 figure taking out the reported option barriers at that level as it reached its highest level since December of 2011. The run higher in the pair occurred despite another weak GDP reading from Spain with the flash report coming in at -0.7% versus -0.6%.
However, as we noted earlier, the EURUSD has not been trading on economic data for quite some time, but rather on investors optimism regarding the stabilization of the financial sector in the region’s periphery economies. With EZ sovereign debt yields continuing to compress and converge the currency pair has benefited from the continuing unwind of the “euro breakup” trade. This was clearly evident in today’s session as euro set fresh highs on many of the crosses including EURGBP EURJPY and EURAUD.
Currency market investors are clearly betting that the easing of the financial conditions in the region will translate into a pick up in the economic activity for the Eurozone as the year develops. In the meantime, the EURUSD is clearly enjoying strong upside momentum and may target the 1.3550 level as the day proceeds and further option barriers fall by the wayside.