The euro slipped a third of a percent on Monday as investors took profits after a recent rally though currency markets remained bullish about the outlook for the single currency on the backdrop of a strengthening economic recovery.

With foreign exchange markets extending the "sell dollar" theme from late last year and Asian stocks creeping towards all-time peaks, the euro's dip was taken as an opportunity to buy the single currency by some investors.

"The outlook for the Fed has been already priced into the market so the uncertainty is around ECB's policy stance though the low inflation and the strong euro will certainly be a concern for policymakers," said Kenneth Broux, an FX strategist at Societe Generale in London.

Flash inflation estimates for December across the eurozone area printed at 1.4 percent last week, slightly slower than 1.5 percent in the previous month and well below an ECB target.

Lackluster inflation pressure in Europe has been accompanied by a strengthening economic recovery across the continent and improvement in China and the United States, fueling risk appetite.

"The overall economic trend is minutely supportive for the U.S. dollar as we are seeing a global recovery led by China and Europe and there is a lot of cash sitting on the sidelines waiting to buy European assets," said Peter Chatwell, head of European rates strategy at Mizuho International in London.

Friday's headline U.S. nonfarm payrolls increased by 148,000 jobs last month, against broader expectations of an increase of 190,000 jobs, though an unchanged unemployment rate holding stable at a decade low of 4.1 percent pointed to a solid jobs market.