Euro touches session highs on data showing German business confidence improves

The euro touched session highs against the dollar on Wednesday after data showing German business confidence improved this month boosted the outlook for the euro area’s largest economy.

EUR/USD was up 0.26% to 1.0952 from around 1.0929 earlier. Elsewhere, the euro gained ground against the yen, with EUR/JPY up 0.16% to 131.03 and was steady against the pound, with EUR/GBP at 0.7359.

The Ifo Institute said its business climate index rose to 107.9 this month, up from 106.8 in February, while economists had expected a reading of 107.3.

The poll indicated that German companies were more positive about the current situation than they were last month, with the current conditions index rising to 111.3 from 112 in February, and were also more optimistic about their prospects for the next six months.

"Strong growth in the fourth quarter of 2014, combined with low energy prices and the weak euro exchange rate have boosted confidence in the economy," said Ifo economist Carsten Brzeski.

According to the report, the declining euro and lower oil prices are giving German firms a lift. The decline in the euro exchange rate also gave exporters more confidence about future prospects.

The euro’s gains were held in check after stronger U.S. economic reports, including an uptick in inflation, boosted the outlook for higher interest rates.

On Tuesday official figures showed that U.S. consumer prices rose 0.2% in February, rebounding after a 0.7% decline in January, while core inflation also ticked higher.

The growing tendency in underlying inflation signalled that the Federal Reserve would still have leeway to tighten monetary policy even with inflation running below target.

The greenback experienced pressure since the Fed indicated last week that it may raise interest rates more gradually than markets had expected.