The British Pound also rose to the highest level this year against the Dollar after ICAP, the world’s biggest broker of transactions between banks, posted increased profit, and Marks & Spencer Group Plc’s net income beat analyst estimates, stoking optimism that the worst of the recession is over.

Analysts said the EUR-positive reaction to the ZEW report suggested that market participants saw improving sentiment in the Euro- Zone as boosting demand for risk, even as other data show that the economy remains weak. Gains in the EUR and Sterling helped to push the Dollar down as some traders unwind positions in the U.S currency. The USD is perceived to be a safe-haven option during times of uncertainty; however, the ongoing bets that the global economy is improving has warmed demand among investors for riskier trades in past weeks.

The German Unemployment Change indicator registered a significant rise in December, increasing to 18k unemployed from 4k last month; its lowest reading since February 2006, signaling an end to a three-year labor market boom as the global credit crisis hits companies in Europe’s largest economy. As a result, the head of the Federal Labor Office warned that labor markets would soon feel the impact of the economic downturn.

Looking ahead to today, the most important financial indicator scheduled to be released from Europe is Germany’s Factory Orders. Analysts are forecasting this figure to increase from its previous reading. Traders will be paying close attention to today’s announcement, as a stronger than expected result may continue to bolster the EUR. Also important to watch today will be ECB President Jean-Claude Trichet’s speech at the ceremony which welcomes Slovakia to the EUR, transforming the Euro-Zone currency into a 16-nation currency.