The ongoing stalemate between U.S. Democrats and the White House in agreeing on a coronavirus aid bill poses a significant threat to the U.S. economy, which is likely to undermine the dollar.
Federal Reserve officials have repeatedly warned that the economy will suffer if fiscal help is not delivered in a timely fashion.
Richmond Fed President Thomas Barkin sounded the alarm bell this week, saying the coronavirus pothole for the U.S. economy would turn into a 'sinkhole' if U.S. lawmakers didn't act nW1N2B8003nL1N2FF1GV.
The gridlock in Washington D.C. nL1N2FF0QW contrasts with the historic coronavirus aid package delivered by the European Union last month nL3N2ES2HF. By mutualizing debt for the first time, that deal enhanced the euro's appeal as an alternative to the dollar as a reserve currency.
The delay in agreeing to an aid bill in the U.S. has resulted in gold resuming its move higher. Gold's rally in July and early August to the all-time high at 2,072 coincided with the biggest monthly rise in the EUR/USD in 10 years.
EUR/USD resistance is at the 1.1916 trend high made on Aug 6, the day before gold hit its record high. A EUR/USD break above 1.1920 is likely to result in a test of the 1.2000 level.
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