German economic sentiment bounced back in August to a four-month high on Tuesday, data released by think tank ZEW showed, offering hope that the euro zone is slowly pulling out of recession.
The economic sentiment index for August climbed to 42.0, according to official data. This was higher than a figure of 36.3 for July and managed to beat estimates in a Reuters poll of 40.0. It marked the highest level since March 2013.
The euro climbed to 1.33 against the dollar following the news, after trading at lows of 1.328 in the session. Yields on Bunds all ticked higher with the interest rate on 10-year German government bonds rising to 1.773 percent after closing the last session at 1.704 percent.
"First signs of an end to the recession in important euro zone countries may have contributed to the indicator's rise," ZEW said in the accompanying press release on Tuesday.
"This is also reflected by the strong increase of economic expectations for the euro zone. Furthermore, the economic optimism is supported by the robust domestic demand in Germany."