Forex Today: Chaos in the US won’t let the greenback keep going

Here is what you need to know on Monday, August 3:

The American dollar recovered nicely on Friday, but weekly basis, closed in the red against most major rivals, a sign of its persistent weakness. Extreme oversold conditions and profit-taking ahead of the weekend were behind its recovery.

Chaos in the US:

The US Congress failed to agree on a new stimulus deal after weekly unemployment benefits of $600 expired last week.  Republicans and Democrats continue to discuss a coronavirus relief package. Democrats pretend to extend the full $600-a-week federal unemployment payments through January as part of a sweeping $3 trillion recovery plan, while Republicans aim for a short-term extension or a continuation of the aid at a lower rate.

On Friday, Fitch Ratings has affirmed the United States' Long-Term Foreign-Currency (LTFC) and Local-Currency (LC) Issuer Default Ratings (IDRs) at 'AAA' and revised the Outlooks to Negative from Stable.  

US President Trump suggested delaying this year’s presidential election, indicating that postal voting could lead to the “most inaccurate and fraudulent election in history.” He does not have the power to do so, and any delayed would need to be approved by Congress.

The number of new coronavirus cases in the country seems to have stabilized at around 60,000 new cases per day. The death toll in the country has reached 158K according to Sunday morning figures.

The dollar has little room for a sustained advance in this scenario.

The EUR/USD pair traded as high as 1.1908 and settled at 1.1780, with the shared currency affected by a record GDP contraction of 12.1% in the second quarter of the year.

Coronavirus developments:

In the UK,  the UK government imposed new restrictions on 4.3 million people in northern England after a recent rise in cases. Also, PM Johnson announced a delay to the further easing of coronavirus restrictions in England for at least two weeks, initially scheduled to take place at the beginning of August.  British Trade Minister Liz Truss will meet top U.S. officials in Washington this week to assess progress on reaching a free trade agreement between the two countries. Brexit concerns have remained in the background. GBP/USD holds near 1.31.

 In Australia, Victoria’ officials toughen its social distancing measures after announcing a state of disaster. The measures come after the Melbourne area reporter over 670 new coronavirus cases on Sunday and will extend the current lockdown for another six weeks. The news may hit the Aussie at the weekly opening.

Commodities and other markets:

Gold trades near record highs, after it hit $1,983 a troy ounce last week. Crude oil prices, on the other hand, remain stable with WTI trading at around $40.00 a barrel.

US indexes were sharply down for a second consecutive week. Treasury yields remained depressed and near record lows. Yields for the 3-year note and the 5-year note hit all-time lows, while that on the 10-year note plunged to 0.52%, a four-month low.

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