By Karen Brettell

(Reuters) – The U.S. dollar fell on Tuesday as Federal Reserve Chair Jerome Powell indicated no urgency in cutting short-term interest rates, while traders awaited clarity on potential trade tariffs from President Trump.

Powell, in his testimony before the Senate Banking, Housing and Urban Affairs Committee, noted that the overall view on rates reflects a “strong overall” U.S. economy, characterized by low unemployment and inflation above the Fed’s 2% target. His remarks were largely anticipated by traders.

He emphasized that the Fed’s role is to respond to the impact of tariff or trade policies on the economy, rather than to comment directly on them. “He’s trying to be very, very, very conservative in his commentary and not spook anybody,” noted Helen Given, an FX trader at Monex USA in Washington.

Traders seem less reactive to news about potential tariffs, which have previously caused fluctuations due to concerns over their impact on inflation and growth. Given commented, “We’ve seen a lot of volatility come off of tariff headlines in the last two weeks. … Everyone is just in a wait and see mode.”

Futures indicate a probability of 36 basis points worth of Fed rate cuts by year-end, suggesting one 25-bp cut and a slim chance of a second one.

Powell is scheduled to testify before the House Financial Services Committee on Wednesday. The upcoming consumer price data for January is key, expected to reflect stubborn inflation.

The U.S. dollar index was down 0.37% at 107.96.

Trade tensions and tariffs will likely remain crucial for traders, particularly as Trump announced plans for reciprocal tariffs on other countries. Trump reiterated on Sunday he would introduce new 25% tariffs on all steel and aluminum imports.

The European Union responded by stating it would implement “firm and proportionate countermeasures.” The euro had risen 0.49% to $1.0357.

The Canadian dollar gained 0.14% to C$1.43 per dollar, recovering from earlier losses. Canada, Brazil, Mexico, South Korea, and Vietnam are key steel suppliers to the U.S.; Canada leads in aluminum imports.

The Japanese yen declined 0.3% to 152.45 per dollar, having reached a peak of 150.93 on Friday, the highest since December 10. Meanwhile, the Australian dollar increased 0.29% to $0.6293, as PM Albanese noted constructive discussions with Trump regarding possible exemptions for Australia from steel and aluminum tariffs.

In cryptocurrency news, Bitcoin fell 2.26% to $95,204.76.