The euro rallied against most of its major currency counterparts during last week's trading session. The euro climbed about 250 vs. the U.S. dollar and the EUR/USD pair reached a 4-month high. The 17-nation currency also saw a 300 pips rise against the Japanese yen.
The euro strengthened last week after the European Central Bank President (ECB) said the ECB may raise interest rates next month to counter accelerating inflation. Rising food and commodity prices have the ECB concerned that if it does not get ahead of inflation concerns, then rising prices could have a negative impact on the euro zone economy.
Investors also understand that unlike the ECB, the Federal Reserve isn't expected to hike rates anytime soon, and this naturally makes the euro a much more appealing asset.
As for the week ahead, traders are advised to follow any hint regarding a potential rates change from the euro-zone, as this issue looks to dominate this week's economic news as well. Special attention should also be given to German economic releases, as they usually have a large impact on the euro.