EUR/USD hit 1.3308 during U.S. morning trade, the pair’s highest since April 4; the pair subsequently consolidated at 1.3281, up 0.40%.
The pair was likely to find support at 1.3223, the session low and resistance at 1.3366, the high of April 3.
Sentiment on the single currency was boosted by signs of progress in negotiations aimed at avoiding the fiscal cliff, automatic tax hikes and spending cuts due to take effect on January 1, which investors fear could threaten U.S. and global growth.
In the euro zone, data showed that German business confidence continued to improve in December, in spite of the deteriorating outlook for the euro zone economy.
The Ifo economic institute's German business climate index came in at 102.4 points this month, up from 101.4 in November, beating analysts' expectations for a reading of 102.0.
The euro was close to two-month highs against the pound, with EUR/GBP up 0.23% to 0.8158 and was trading close to 16-month highs against the weaker yen, with EUR/JPY rising 0.66% to 112.14.
In the U.S. official data showed that building permits increased 3.6% in November, to a seasonally adjusted annual rate of 899,000 units, the highest since July 2008. Analysts had forecast a gain of 0.8% to 0.875 million.
However, U.S. housing starts fell by 3% in November to a seasonally adjusted annual rate of 0.861 million, compared to expectations for a 2.5% decline to 0.873 million.