EUR/USD advances to fresh daily highs above 1.0850 on broad USD weakness

• Upbeat market mood in American session limits USD's recovery.
• US Dollar Index inches closer to 101 after rebounding to 101.90.
• Coming up on Thursday: ECB's Economic Bulleting and US Q4 GDP data.

The EUR/USD pair spent the first half of the day fluctuating around the 1.0800 handle but gained traction during the American session amid a fresh USD-selling wave and touched a daily high of 1.0869. As of writing, the pair was trading at 1.0860, adding 0.67% on a daily basis.

USD struggles to find demand as investors cheer fiscal stimulus deal

The recovering market sentiment after lawmakers in the US reached an agreement on the massive $2 trillion coronavirus emergency stimulus bill makes it difficult for the USD to find demand on Wednesday. The US Dollar Index (DXY), which closed the previous day 0.7% lower, was last down 0.65% on the day at 101.12.

Although the DXY rebounded to 101.90 earlier in the session, sharp upsurge witnessed in Wall Street's main indexes confirmed the upbeat mood limited its upside. Republican Senate Majority Leader Mitch McConnell said the legislation is expected to be finalized on Wednesday. “This is a wartime level of investment into our nation,” McConnell added. 

Meanwhile, the data from Germany showed that the Ifo Business Climate Index slumped to 86.1 in February to miss the market expectation of 87.7. Commenting on the data, "this is the steepest fall recorded since German reunification and the lowest value since July 2009," Ifo President Clemens Fuest noted in a statement and said the German economy could shrink by as much as 20% in 2020.

On Thursday, the European Central Bank will release its monthly Economic Bulletin. Later in the day, weekly Initial Jobless Claims, Goods Trade Balance and Q4 Gross Domestic Product (GDP) data from the US will be looked upon for fresh impetus.

Technical levels to watch for