Euro bulls were out in full force today, helping to set new record highs against the US dollar and the Japanese yen, with EUR/USD hitting 1.3798 and EUR/JPY surging to 168.84. The impetus was from an unexpected revision to first quarter GDP to 3.1 percent from a year earlier, led by business investment and surprisingly, export growth. In fact, exports were revised up to 0.8 percent from 0.3 percent, signaling that the appreciation of the euro did little to quell demand for European products.
Furthermore, with expansion in the Euro-zone remaining so resilient, the European Central Bank will be more likely to enact policy tightening this year. However, markets will first need to see a pick up in price pressures before ramping up their bets on a hike to 4.25 percent, as CPI is still below the bank?s 2.0 percent ceiling.