Euro hit a four-month high versus the U.S dollar on Tuesday’s European trading session, after ECB’s President Mario Draghi said the central Bank will not hesitate to use interest rates and non-standard measures to help repair the Eurozone economy.

ECB’s chief Mario Draghi said on Tuesday the central bank is "ready to act" if need be to aid the euro area economy, although recent signs of market stabilization meant policy was proving to be effective.

Draghi reiterated in his speech that there are low level signs of improvement in the euro-zone economy, and argued governments to stick to reforms, including the upcoming banking union.

Draghi also defended the ECB`s record on inflation and its efforts to help spur recovery, including its bond-buying program (OMTs), which has been widely credited with restoring calm to euro-zone sovereign markets.

The single currency found support after Germany’s ZEW Survey of investor confidence advanced to a three-month high. German investor confidence surged more than median expectations in June amid signs of progress from the euro area’s biggest economy.

The EURUSD pair is currently trading at $1.3384, from an opening at $1.3362, while hitting a high of $1.3398, and a low of $1.3325. The trading range for today is among the key support at 1.3225 and key resistance at 1.3505.

ZEW survey economic sentiment rose to 38.5 this month from 36.4 in May, coming above forecast of 38.1, and the current situation gauge fell to 8.6 from 8.9, lower than forecasts of 9.5.  The ZEW survey on economic sentiment for the euro area rose to 30.6 in June from 27.6.

The pound is losing steam pushing the GBPUSD lower to trade around $1.5634, while recording the highest level of $1.5691 and lowest of $1.5632.

Pound extended losses on Tuesday after data showed Producer price inflation in the U.K. fell unexpectedly in May, declining for the third consecutive month. PPI input fell by a seasonally adjusted 0.3 percent in May, compared to expectations for a 0.1 percent increase.

The report also showed that PPI output was flat last month, missing expectations for a 0.1 percent gain, after inching down 0.2 percent in April.

UK`s inflation rebounded in May, moving away from the Bank of England`s target. Data released on Tuesday showed that CPI for the year ended May rose to 2.7% after dropping to 2.4% in April, higher than median forecast of 2.7%.

The spotlight will soon shift to the US Federal Reserve, which will release a policy statement on Wednesday. The dollar rose on Tuesday, with further gains depending on U.S. Federal Reserve guidance on its monetary policy.

What the Fed might do with quantitative easing program has become a hot issue for the markets and there is growing speculation that the Fed could tighten its $85 billion in assets every month stimulus program sooner than expected.

Bernanke will hold a news conference on Wednesday after the Fed`s two-day policy meeting. Some investors are looking to him to give assurances monetary policy will remain accommodative with little prospect of tightening.

The greenback extended gains on Tuesday, where the USDIX is currently trading around 80.88 after opening at 80.82, having so far hit a high of 81.03 and a low of 80.74.

Global economic growth and improved employment were a significant part of the agenda at the annual summit of the Group of Eight major industrialized nations in Northern Ireland. Trans-atlantic trade and sorting out Syria have also dominated the G8 talks.

The world leaders said that the worst has passed for the global economy, however, economic prospects remain weak. Downside risks in the euro area have abated over the past year, but it remains in recession, the G8 leaders added following their discussion on the global economy on Monday.

“Global economic prospects remain weak, though downside risks have reduced thanks in part to significant policy actions taken in the US, euro area and Japan, and to the resilience of major developing and emerging market economies,” G8 leaders said on Monday.

In Japan, G8 leaders said that the country needed to address the challenge of defining a credible medium-term fiscal plan, while noting that its growth would be supported by its fiscal stimulus, bold monetary policy and recently announced strategy for promoting private investment.

Syria Stalemate

David Cameron tried to pave the way for a Syrian peace conference at the G8 summit, by setting out the terms those present should agree on as the basis for a transition to a government after Bashar al-Assad`s departure.

However, Western nations struggled to hide their differences with Russian president Vladimir Putin over Syria. Russian President Vladimir Putin for supporting Syria`s Bashar al-Assad`s attempt to crush a two-year-old uprising, setting the stage for a tense G8 summit of the world`s most powerful nations.

Russian President Vladimir Putin said he still doesn`t see eye to eye with the United States on Syria. This comes days after the United States pledged to play a greater role in assisting Syrian rebels, citing evidence that President Bashar al-Assad`s regime used chemical weapons against the rebels and his own people.

Trans-Atlantic Trade

The United States and the European Union have agreed to launch talks on creating between them a free-trade zone, which aims to boost economic growth in the U.S. and the EU and add to the more than 13 million jobs.

David Cameron, U.S. President Barack Obama, European Commission President Jose Manuel Barroso and European Council President Herman Van Rompuy, announced that the U.S and the European Union (EU) will be launching negotiations on a Transatlantic Trade and Investment Partnership agreement.

The trade talks, to begin in earnest in Washington July 8, are expected to be comprehensive and designed to expand on the $458 billion in U.S. goods and services exported to the EU in 2012. Leaders said repeatedly that trade means greater investment and prosperity, which translates to job creation.

Global economic growth and improved employment were a significant part of the agenda at the annual summit of the Group of Eight major industrialized nations in Northern Ireland. Transatlantic trade and sorting out Syria have also dominated the G8 talks.

The world leaders said that the worst has passed for the global economy, however, economic prospects remain weak. Downside risks in the euro area have abated over the past year, but it remains in recession, the G8 leaders added following their discussion on the global economy on Monday.

“Global economic prospects remain weak, though downside risks have reduced thanks in part to significant policy actions taken in the US, euro area and Japan, and to the resilience of major developing and emerging market economies,” G8 leaders said on Monday.

In Japan, G8 leaders said that the country needed to address the challenge of defining a credible medium-term fiscal plan, while noting that its growth would be supported by its fiscal stimulus, bold monetary policy and recently announced strategy for promoting private investment.

Syria Stalemate

David Cameron tried to pave the way for a Syrian peace conference at the G8 summit, by setting out the terms those present should agree on as the basis for a transition to a government after Bashar al-Assad`s departure.

However, Western nations struggled to hide their differences with Russian president Vladimir Putin over Syria. Russian President Vladimir Putin for supporting Syria`s Bashar al-Assad`s attempt to crush a two-year-old uprising, setting the stage for a tense G8 summit of the world`s most powerful nations.

Russian President Vladimir Putin said he still doesn`t see eye to eye with the United States on Syria. This comes days after the United States pledged to play a greater role in assisting Syrian rebels, citing evidence that President Bashar al-Assad`s regime used chemical weapons against the rebels and his own people.

Trans-Atlantic Trade

The United States and the European Union have agreed to launch talks on creating between them a free-trade zone, which aims to boost economic growth in the U.S. and the EU and add to the more than 13 million jobs.

David Cameron, U.S. President Barack Obama, European Commission President Jose Manuel Barroso and European Council President Herman Van Rompuy, announced that the U.S and the European Union (EU) will be launching negotiations on a Transatlantic Trade and Investment Partnership agreement.

The trade talks, to begin in earnest in Washington July 8, are expected to be comprehensive and designed to expand on the $458 billion in U.S. goods and services exported to the EU in 2012. Leaders said repeatedly that trade means greater investment and prosperity, which translates to job creation.

The European Central Bank has a lot of monetary tools that could be used if needed, President Mario Draghi said in a press conference in Jerusalem.

"There are numerous other measures - standard interest rate policy and non-standard measures - that we can deploy and that we will deploy if circumstances warrant," Draghi said.

The ECB decided this month to hold interest rate at its record low of 0.50 percent while track carefully the latest developments for any needed intervention.

Draghi probably referred to the possibility of cutting deposit rate to negative territories, which means charging lenders parking their cash at the ECB, when mentioned “some of those measures may have unintended consequences. This does not mean that they should not be used, but it does mean that we need to be aware of those consequences and manage them appropriately.”

He added that the most recent data has suggested the economy is showing signs of improvement which means the interest rate cut policy is becoming an effective method again.

In the coming period the euro area should take advantage of low inflation, rebound in confidence and stability in financial markets.

He also echoed that "in the period ahead, we will monitor very closely all incoming information on economic and monetary developments and stand ready to act if necessary."

Following his comments, the euro plunged against the U.S. dollar to hit a low of 1.3325 while it is currently trading around 1.3350.