Investing.com - The euro firmed against the dollar on Monday after an upbeat German business climate report surpassed expectations and offset ongoing expectations for the European Central Bank to loosen policy in the near future.
In U.S. trading, EUR/USD was up 0.31% at 1.2429, up from a session low of 1.2363 and off a high of 1.2443.
The pair was likely to find support at 1.2503, last Thursday's low, and resistance at 1.2600, last Wednesday's high.
The single currency found support after a report showed that German business sentiment improved this month after six successive months of declines, indicating that the downturn the euro area’s largest economy may be ending.
Germany’s Ifo business climate index rose to 104.7 from 103.2 in October, confounding forecasts for a decline to 103.0.
The current conditions index rose to 110.0 from 108.4 last month and the expectations index improved to 99.7 from 98.3, both figures topping market forecasts.
The data helped offset expectations that the European Central Bank may loosen policy further to stimulate the economy, possibly rolling out purchases of government bonds.
Euro zone bond yields fell to record lows on Monday amid expectations that the ECB is moving closer to embarking on fresh stimulus measures to spur growth and inflation in the region.
The yield on Spanish 10-year bonds dropped below 2% for the first time, falling to 1.97%, while the yield on Irish 10-year bonds fell to 1.48% from 1.49% late Friday.
On Friday, ECB President Mario Draghi warned that inflation expectations were declining to levels that were very low and said the bank is ready to expand its stimulus program to boost inflation as quickly as possible.
The ECB's current stimulus program includes purchases of asset-backed securities and covered bonds, though markets are keeping a close eye out for plans to announce purchases of government debt, a stimulus tool known as quantitative easing.
Meanwhile in the U.S., financial data firm Markit reported earlier that its flash service-sector purchasing managers index hit 56.3 in November, slightly below expectations and the lowest since April, compared with October's final reading of 57.1.
Elsewhere, the euro was up against the pound, with EUR/GBP up 0.09% at 0.7922, and up against the yen, with EUR/JPY up 0.88% at 147.25.
On Tuesday, expect investors to track German and U.S. economic growth data as well as a U.S. consumer confidence report.