German investor confidence unexpectedly rose to a seven-month high even as Europe's sovereign debt crisis continues to take its toll on the region's most important economy.

The ZEW Centre for European Economic Research in Mahhheim said its key index of investor and analyst expectations for the economy rose to 6.9 points in December from a reading of -15.7 points in November. It is the first positive reading for the benchmark index since May. The index of current conditions also advanced, although marginally, to 5.7 points from 5.4 points in the previous month.

"The indicator's rise shows that the financial market experts expect the economic activity to stabilize until early summer 2013" the ZEW said in its release. "Positive U.S. economic data may have contributed to this assessment. They may have spurred the hope that the global economy will gain momentum."

"The financial market experts forecast the development of the economic activity in 2013 with pre-Christmas optimism," said ZEW President Wolfgang Franz. "Although the cooling down of the economic activity will last until the beginning of 2013, Germany will not have to face a recession. However, this only applies if the crises in the eurozone do not deepen once again."

The single currency rose to a session high of $1.2974 against the US dollar following the release.

Germany's Federal Statistics Office said Monday the country's trade surplus narrowed to its lowest level in more than six months, hitting €15.2bn (£12.2bn/$19.7bn) in October thanks to a small 0.3 percent rise in exports. Industrial production for the month fell a steeper-than-expected 2.6 percent.

Last week Germany's Bundesbank lowered its growth 2013 growth forecast for Europe's largest economy a day after the European Central Bank did the same for the wider Eurozone. The Bundesbank now sees Germany growing at 0.4 percent next year, down from a June forecast of 1.6 percent.

"Given the difficult economic situation in some euro-area countries and widespread uncertainty, economic growth will be lower than previously assumed," the Bundesbank said.

"The Bundesbank does not see a protracted slowdown but instead anticipates a return to growth path soon." However, the bank also hinted at a near-term recession, warning that "there are even indications that economic activity may fall in the final quarter of 2012 and the first quarter of 2013."