The euro, which appeared set for parity with the US dollar less than six months ago, is poised to extend its year-to-date rally, bolstered by upbeat economic data and cautious optimism from ECB chief Mario Draghi.

The single currency held steady overnight, albeit in thin trade, after the president of the European Central Bank told EU lawmakers in Brussels that the "economic upswing is becoming increasingly solid and continues to broaden across sectors and countries", and "downside risks to the growth outlook are further diminishing".

Still, Draghi isn't signalling any rethink just yet: "We remain firmly convinced that an extraordinary amount of monetary policy support, including through our forward guidance, is still necessary."

His comments come amid a heightening debate within the ECB, including from Bundesbank chief Jens Weidmann, about planning for a return to more normal policy as inflation turns more positive. The eurozone's May CPI estimate is scheduled to be released on Wednesday, and that is seen as the next key trading data point for the single currency.

The euro was fetching $US1.1129 on Tuesday, about 1 cent off recent nine-month highs. The currency has traded between $US1.11 and $US1.12 for most of the last two weeks, lifting its year-to-date advance to more than 6 per cent with an increasing number of forecasters seeing $US1.15 within reach and perhaps even $US1.20 over the next two years.

The euro also has recovered against the Australian dollar; the Aussie is trading near 66.64 euro cents - a 2.7 per cent year-to-date decline. Forecasters see losses widening, perhaps to a sub 60 euro cents level, reflecting a divergence in overall monetary policy stances and interest rates in particular.

"Looking ahead we think the euro still has a fair bit of upside, but our sense is that the (euro/$US) pair is likely to do a bit of work around the 1.11/12 (level) before it heads higher again," said NAB currency strategist Rodrigo Catril. "Our forecast is for the euro to end the year at 1.15, but given the pair's swift appreciation of late, the risk is that we get there sooner rather than later."

"As for our AUD/EUR view,  we think the pair is likely to be face strong downward pressures, both from the USD and EUR arguments mentioned above," Catril said. "Putting our AUD/USD and EUR/USD views together leads to our forecast for AUD/EUR dropping to 62 euro cents by year end and then sub 60 next year."

Among the reasons for the return of positive sentiment on the euro is that the eurozone economy is expanding at its fastest pace in six years. The IHS Markit Eurozone PMI held steady at 56.8 in May, according to data released last week, unchanged on April's six-year high, according to the preliminary flash estimate.