In its monthly report published on Monday, Germany's Bundesbank noted that the German economy likely shrunk in the last quarter of 2021, per Reuters.

Regarding the inflation outlook, Bundesbank said that price pressures could remain exceptionally high in early 2022 due to surging energy costs.

"The adjustments in behaviour and the triggered containment measures in some cases had a significant impact on economic activity in the service sector, especially in December," the Bundesbank noted in its publication. "Germany's real gross domestic product is likely to have fallen slightly in the final quarter of 2021."

Market reaction

The EUR/USD pair remains under bearish pressure during the European trading hours and was last seen losing 0.25% on the day at 1.1310.