FOREX-Dollar treads water as political impasse slows rally

* Graphic: World FX rates in 2020 https://tmsnrt.rs/2RBWI5E

(Updates prices)
By Iain Withers
LONDON, Aug 4 (Reuters) - A dollar rebound faltered on
Tuesday as political wrangling over a U.S. relief plan and a
gloomy economic outlook weighed on the currency.
After its worst month in a decade in July, the greenback
started August on a firm note as some investors trimmed their
short positions.
That only carried it so far, however, and the dollar was
broadly flat in lunchtime European trading hours on Tuesday
against a basket of currencies, after earlier slipping 0.3%.
=USD
The euro - which gained 5% at the dollar's expense in July -
edged up 0.1%, last at $1.1772. EUR=EBS
"I think the eurozone recovery will be a lot faster than the
U.S. recovery and that growth differential will continue to
drive EUR/USD higher," Marshall Gittler, head of investment
research at BDSwiss, said in a note.
The Aussie dollar AUD=D3 edged ahead 0.3% after the
central bank held policy steady, as expected.
Australia's central bank predicted that the economic
recovery would be uneven. The country's second biggest state
Victoria is under lockdown to fight a resurgence of the virus.
Despite a slowdown in new U.S. virus cases and encouraging
factory data, investors are reserving judgement on whether a
U.S. economy with 30 million people out of work can really lead
the world's recovery.
Top White House officials and Democratic leaders in the U.S.
Congress were due to try again on Tuesday to narrow gaping
differences over a fifth major coronavirus-aid bill to help
stimulate the economy. Days of closed-door negotiations have so
far yielded few results, participants say. "We're still in a situation (worldwide) where the market
wants to believe the recovery is on track but is still worried
about the COVID situation," said Bank of Singapore FX analyst
Moh Siong Sim.
"The fiscal wrangling in the U.S. is the next key test for
risk sentiment, and if they manage to get a deal - which seems
likely - that could be supportive of risk sentiment."