Early trade in New York: Dollar steadies after Powell opens door to US rate cut

The US dollar was steady on Tuesday after Federal Reserve Chair Jerome Powell alluded to the possibility of an interest rate cut in the face of economic risks, including the global trade war. The US central bank will respond "as appropriate" to trade - and other - headwinds, Powell said in a brief statement included as part of a speech on broader monetary policy issues. Powell said the Fed was "closely monitoring the implications" of the trade dispute that has, since the Fed's last meeting, disrupted global bond and equity markets and posed risks to US and world economic growth.
The dollar index, which measures the greenback against a basket of six rival currencies, fell briefly on the news before recouping those losses and was last 0.06% higher on the day at 97.204. "Powell's comments will be seen as slightly dollar negative but we might not see much of a move today because the greenback already fell yesterday after (St. Louis Federal Reserve President James) Bullard. His comments are not as aggressively dovish as Bullard's yesterday but he does reiterate the same concerns: trade tensions and low inflation," said John Doyle, vice president of dealing and trading at Tempus, Inc.
The dollar fell on Monday to a five-month low against the Japanese yen after Bullard said an interest rate cut "may be warranted soon," given the rising economic risk posed by global trade tensions, as well as tame US inflation. The yen was last at 108.26, 0.2% weaker on the day. The pound climbed from a five-month low on Tuesday but concerns about a disorderly departure from the EU meant gains were minimal, amid promises from US President Donald Trump of a "phenomenal" post-Brexit trade deal. It was last trading up 0.19% at $1.269.
The euro pulled back from six-week highs after lower-than-expected euro zone inflation in May brought the single currency's rally to a halt. It was 0.02% firmer at $1.124.