The euro was firmer after a key survey of German business confidence came in well above expectations, confirming that interest rates in the euro zone will move higher in the coming months. The Ifo Institute said its business climate index rose to 102.0 in January from a revised 99.7 in December, and well above analysts' forecasts for a reading of just 99.7. The news could lead the market to price in more ECB rate hikes, and talk may resurface about the possibility of a hike as early as February. "The IFO has surprised on the upside in four of the last five months, and the survey now stands pretty much at levels that have proven the peak in previous cycles. All of which will test the market's comfort that the ECB's prospective tightening will be rather modest," said CALYON analyst Daragh Maher. The euro is now likely to make a sustained breach of the 1.23 mark against the dollar, he added. In addition, a key French business confidence index also came in firm and in line with expectations. All eyes will therefore be on this afternoon's speech by European Central Bank president Jean-Claude Trichet for further indications on when the next rate move might be. The dollar meanwhile failed to benefit from sharp overnight falls in crude oil prices, as the market remained focused on the prospects of an end to the US rate hiking cycle. US existing home sales data later today could attract attention, given the market's current focus on the outlook for the US housing market and the potential repercussions in terms of interest rates.