The euro maintained its recent gains against the dollar in today’s trading, supported by positive economic indicators emerging from Germany. These figures have reinforced the view that the Eurozone economy is gaining momentum, thereby strengthening the euro’s appeal to investors.

The encouraging German data, which exceeded market expectations, fueled speculation that the European Central Bank (ECB) may consider further interest rate hikes in the near future. Higher interest rates tend to attract foreign investment, thus increasing demand for the euro.

However, analysts cautioned that the euro’s strength could be tested later in the week with the release of key inflation data. A higher-than-expected inflation reading could prompt the ECB to adopt a more aggressive monetary policy stance, potentially leading to further euro appreciation. Conversely, weaker inflation data could dampen expectations of further rate hikes and exert downward pressure on the currency.

Market participants are now keenly awaiting the upcoming inflation figures to gauge the ECB’s likely course of action and its potential impact on the euro’s trajectory.