Euro to US Dollar (EUR/USD) Exchange Rate forecast to reach 7-week high on positive German data

The Euro was approaching a seven-week high against the US Dollar on Monday after a report showed that business confidence in the Eurozone’s largest member climbed to its highest level since in over two years.

According the Ifo institute its business climate index confidence climbed to 111.13 in February, up from the 110.6 level recorded in the previous month. The figure was the fourth consecutive monthly gain and was the strongest reading recorded since July 2011. The figure was better than the 110.5 reading forecast by economists.

The report said that German companies were benefitting from the high demand for German exports but warned that ongoing uncertainty and volatility in the worlds emerging markets could pose a risk. The future expectations component of the index ticked down to 108.3 from 108.9 in January, but was ahead of expectations for a decline to 108.2.

The Euro found further support from a separate report which showed that inflation in the Eurozone was quicker than previously thought last month. The consumer price index came in at 0.8% year on year, a better figure than the 0.7% previously recorded, but fell to -1.1% on a month-on-month basis from a figure of 0.3%.

The single currency also found support after Matteo Renzi was appointed Prime Minister of Italy and as demand for riskier assets improved after the interim government of Ukraine said that it wanted the nation to have closer ties with the European Union.

The Pound meanwhile was able to remain higher against the Euro after Bank of England Governor Mark Carney said that the Central Bank will support the nation’s economic recovery. Economists are expecting that data due on Wednesday will show that the UK economy expanded in the fourth quarter of 2013.