Investing.com - The euro strengthened against the dollar on Tuesday after a widely-watched gauge of German economic sentiment beat expectations.
In U.S. trading, EUR/USD was up 0.68% at 1.2534, up from a session low of 1.2444 and off a high of 1.2540.
The pair was likely to find support at 1.2397, Friday's low, and resistance at 1.2578, Monday' high.
The ZEW Centre for Economic Research reported earlier that its German economic sentiment index rose by 15.1 points to a four-month high of 11.5 this month from October’s reading of -3.6.
Analysts had expected the index to improve by 4.5 points to 0.9 in November.
In addition, the index of euro zone economic sentiment increased to 11.0 in October from 4.1 in September, above expectations for an increase to 4.3, and the better-than-expected data gave the euro a shot in the arm.
The single currency has softened against the dollar in recent sessions as investors prepare for U.S. monetary policy to grow less accommodative while Europe moves in the opposite direction.
European Central Bank President Mario Draghi said on Monday that policymakers will do what it takes to bolster the European economy.
Draghi said "unconventional measures" needed to ensure recovery could involve the purchases of sovereign debt, a monetary policy tool known as quantitative easing that aims to suppress long-term borrowing costs to spur recovery, which weakens paper currencies and boosts stock prices to boost the economy.
The ECB’s current stimulus program includes purchases of asset-backed securities and covered bonds
Tuesday's economic sentiment data eclipsed an uptick in U.S. wholesale prices, mainly as investors snapped up nicely-priced euro positions.
The Commerce Department reported earlier that producer prices inched up by a seasonally adjusted 0.2%, confounding forecasts for a 0.1% decline, after falling 0.1% in September.
Year-over-year, the U.S. producer price index rose at 1.5% in October, outpacing expectations for a 1.2% increase and following a gain of 1.6% in the preceding month.
The core producer price index, which is stripped of volatile food and energy components, eased up by a seasonally adjusted 0.4% last month, beating expectations for a gain of 0.2% and following a flat reading in September.
Core producer prices rose 1.8% year-on-year in October, surpassing forecasts for 1.5% and up from 1.6% in the preceding month.
The Federal Reserve pays close attention to core prices when determining monetary policy.
Elsewhere, the euro was up against the pound, with EUR/GBP up 0.69% at 0.8015, and up against the yen, with EUR/JPY up 0.72% at 146.26.
In Japan, Prime Minister Shinzo Abe announced the delay of a planned sales tax increase and called for snap elections to take place next month.
The announcement came one day after data showed that Japan’s economy unexpectedly contracted by an annualized 1.6% in the third quarter, falling back into recession.
On Wednesday, the U.S. is to release data on building permits and housing starts.
Also on Wednesday, the Federal Reserve is to publish the minutes of its October meeting.