Dollar slides after U.S. political bout, bleak outlook cuts rally

A dollar boost stumbled on Tuesday as political debate over a U.S. coronavirus relief package and a bleak economic outlook weighed on the greenback. 

After suffering its worst month in July, the dollar started August on a firm note as several investors began to cut down on short positions.

The dollar index fell 0.2%. The euro climbed 0.2% to $1.17875 after gaining 5% on the greenback’s weakness in July.

The Australian dollar rose nearly 0.3% after its central bank held its policy steady. The Reserve Bank of Australia forecasted the economy to undergo a patchy recovery as the state of Victoria locks down to control a second coronavirus outbreak.

Despite the slowdown of the U.S. COVID-19 cases and positive factory data, investors are focusing on unemployment data, which rose to 30 million. This led investors and analysts to doubt the U.S. economy’s ability to lead the world’s recovery.

A U.S. coronavirus relief aid is still in the Congress as Democrats and Republicans debated over it, but latest updates claim that top negotiators have made progress.

Experts say that the political bout on the U.S. coronavirus relief aid was a key factor in the risk sentiment and that a deal could likely gain it more support.