What will it take to derail euro rally?

The euro appears poised to top the psychologically important $1.20 barrier against the U.S. dollar for the first time since January 2015, a move that could help cement the shared currencys newfound role as a global haven.

The shared currency has strengthened 13.8% against a broadly weaker dollar EURUSD, -0.0835% this year, as its U.S. rival continues to suffer, in part, from eruptions in the Trump administration, which has also appeared to favor a weaker currency.

See: Trump is waving adios to the longstanding strong dollar policy

Similarly, it has gained 13% against the British pound EURGBP, -0.0972% in the year to date, even though the sterling-dollar pair is not showing visible signs of a U.K.-specific risk premium, Viraj Patel, senior FX strategist at ING, wrote in a note last week.

We rationalize this as both the U.K. and the U.S. political uncertainty offsetting each other in the near-term, making the euro the go to political haven in currency markets, he added. How times have changed.

See: Sterling isnt done feeling the pain of Brexit, analysts say

Supportive economic data, as well as political wins for the pro-globalization and free trade camps in the Netherlands and France have put Europe ahead this year. The currency blocs economy is widely expected to grow faster than that of the U.S. in the medium term, Shannon Saccocia, head of asset allocation and portfolio strategy at Boston Private, told MarketWatch.

The euro trade might be overdone, but the growth and data momentum is still there, said Mark McCormick, North America head of FX at TD Securities, adding that weaknesses in the Italian banking system as well as question marks around the Italian general election next May could introduce some volatility.

Most recently, eurozone unemployment rate hit an eight-year low of 9.1% in June, while GDP grew 2.1% in the second quarter this year. This week, consumer, economic, industrial and services indicators are due on Wednesday, followed by inflation and July unemployment data on Thursday, and manufacturing data on Friday.

The next ECB policy meeting is scheduled for Sept. 7, and market participants will be looking for details on the timing of the roll back of its quantitative easing program. And if the euro keeps rising ahead of the meeting, theyll also be alert to any signs of unease over its strength.

If [the euro] breaks through $1.20, I could see the ECB or other officials starting to make comments [about the impac t of its strength], Brad Bechtel, managing director of FX at Jefferies said, as the expensive euro could hurt the continents export business, the lifeblood of its biggest economy Germany. Around $1.22-$1.24 they could start talking about taking action.

Economists at Capital Economics previously noted that despite the rally, the euro remains below its long-run average of $1.21 versus the dollar and that past efforts at talking down the shared currency have come only after it had topped $1.25.

Speaking of which, the continents next big political event is the German election on Sept. 24. Chancellor Angela Merkel is expected to win another term, but even if her main competitor Martin Schulz should beat the odds, the outcome would still be a pro-E.U. government. In turn, this will increase the scope for the euro to function as a reserve currency further, McCormick said.

Over the long term, we think that it will be reallocation of official re serve balances toward the euro and away from the dollar that will spur a higher euro-dollar, said Thierry Wizman, global interest rates and currencies strategist at Macquarie, in a Monday note. That said, the process may be long and drawn-out, slowly reversing the euros eight year decline as a percentage of global reserve balances, he said.

BIS, Macquarie Currency composition of (global) official foreign exchange reserves

Last weeks retreat for global central bankers in Jackson Hole, Wyo., which had market participants looking for clues to future monetary policy moves, sent the euro to its highest level in more than two years, even though neither Federal Reserve Chairwoman Janet Yellen nor European Central Bank President Mario Draghi made explicit comments. Analysts said Draghis decision not to attempt to talk down the euro likely cleared the way for further gains.

I was surprised that the dollar selloff intensified, Bechtel said on Friday afternoon following Draghis speech. Yellens speech earlier that day kicked off the dollars slump and the euros jump.

Meanwhile, the euro also hit an eight-year high of 拢0.9270 against the British pound on Monday. Its main regional trading partner entered the third round of Brexit negotiations on Monday. Brussels has been tough on Britain, which has been struggling for directio n on its Brexit stance. Prime Minister Theresa May, who was in favor of a hard Brexit, recently conceded that EU laws will still impact Britain after it leaves the union, while the Labor party prefers a softer solution.