Well... I'm pretty sure the age of consent is still 16, so there could be a legal issue there--although they are both minors, so that would be taken into consideration, but I don't think the law would rate it as "normal".
Apart from that, I would say, how would you feel if they got married? I'm guessing you wouldn't feel like they were ready to combine bank accounts, incomes, get ready to raise kids etc, but think about why not? If they're not ready to be united in those ways, why would they be ready to be united physically? I mean, a person is a whole person, and when you look up the physiology and psychology of how sex works, it really tends to glue people together, especially over time. But if they are not united in the other aspects of their lives, aren't they kind of setting themselves up for heartache? Isn't kind of like supergluing two things together that are likely to be pulled apart later? I mean, sounds like they have known each other for a while (!) so you might say it's a pretty stable relationship, but it's still going to be hard for them to be simultaneously together (sexually) and not together (the rest of life) for however many years until they do (maybe) get married. Or if they break up, having been physically intimate is going to make that even more painful.
Sex before marriage was basically accepted in my home growing up, but as I've thought about it (and seen it play out), it doesn't make sense to me that two people can be as physically intimate as it's possible to be, but relatively distant or uncommitted in other ways. Although we're not *just* bodies, our bodies are a huge part of who we are--to want to be close to someone's body, but not make a whole of life commitment to the whole person is kind of like...using the other person.
I'm not saying your daughter and her boyfriend are aiming to use each other, but... they are pretty young. Too young for marriage, right? So they can't really make a whole of life commitment at this stage. So I think either way, it's gonna get messy later. Even if they don't get pregnant (and no contraceptive is 100%).
What do you think?