Investing.com - The U.S. dollar erased gains against other major currencies on Tuesday, as investors were cautious ahead of the U.S. State of the Union speech due later in the day and the Federal Reserve's monthly policy decision on Wednesday.
Later Tuesday, U.S. President Donald Trump was set speak to Congress in his first official State of the Union address.
Comments from the White House recently weighed on the greenback, especially after U.S. Treasury Secretary Steven Mnuchin said that a weaker dollar was positive for American trade.
However, President Trump contradicted Mnuchin's position by defending the need for a strong currency. Traders fear the U.S. administration may use currency policy as a tool to get better trade deals with other countries.
Market participants were also looking ahead to the Fed's upcoming policy decision on Wednesday for potential indications on the pace of interest rate hikes this year. The U.S. central bank is widely expected to raise rates three times in 2018.
The U.S. dollar index, which measures the greenback’s strength against a trade-weighted basket of six major currencies, was down 0.09% at 89.09 by 05:15 a.m. ET (19:15 GMT), off session highs of 89.47.
EUR/USD was up 0.11% at 1.2396, while GBP/USD slid 0.37% to 1.4067 after leaked government papers showed that Britain's economy would be worse off under all three likely Brexit scenarios.
Preliminary data on Tuesday showed that gross domestic product in the euro zone rose as expected in the fourth quarter.
The yen and the Swiss franc were higher, with USD/JPY down 0.26% at 108.67 and with USD/CHF shedding 0.37% to 0.9340.
Elsewhere, the Australian and New Zealand dollars were little changed, with AUD/USD at 0.8087 and with NZD/USD at 0.7324.
Meanwhile, USD/CAD edged down 0.10% to trade at 1.2328.