Risk Rally Sends Euro Higher in Forex Trading

There is a risk rally going on right now on the currency market, sending the euro higher in forex trading. Most of the euro's gains today are coming as economic data shows improvement. Sterling is also seeing solid progress in currency trading. Germany, the largest economy in the euro zone, came back with a better than expected Ifo reading, and that is helping.

Also, other signs of economic improvement are helping to boost the euro in forex trading, helping traders forget about sovereign debt problems. GFT's Boris Schlossberg reports in FX360 on forex traders' shift in focus:

Over the past several days, the upside economic surprises from the Eurozone have to a large extent allayed investor fears regarding  the problems in the financial sector by demonstrating that business activity  in the 16 member union may be stronger than originally forecast. This upside revision in growth should prove to a be strong support for the banking sector and as a result some of the more extreme  concerns regarding EZ fiscal health should begin to evaporate. “

It will be interesting to see how long this risk rally lasts, and whether or not sub-par data out of the U.S. will derail it.