Last night EUR/USD broke through the 1.0600 barrier and kept falling all the way through 1.0550 level in essentially one way trade today despite relatively upbeat economic data as the flash PMI readings from the region came in better than expected.

PMI data provides some of the best, most timely readings of the economic activity in the region, yet despite the better than expected readings, the EUR/USD remained under pressure all night long as rates in the region continued to decline. German 2-year yields dipped to an all-time low of -84bp as investors continued to seek safety.

Why such angst amidst what is the best growth data in years? Because the single currency is now trading on political rather than economic concerns as populist parties in both Netherlands and France show rock solid foundation of support.

For now, the 1.0500 remains key, but the true support lies at the 1.0400 figure. If tomorrow’s German IFO report surprises to the upside, but the data is ignored as well, that would suggest that the downward momentum is so dominant that the pair could revisit the 1.0400 figure this week.