1. Markets waiting for the Fed

Fed Chair Janet Yellen is scheduled to testify on the economy before the Senate Banking Committee at 15:00 GMT today.

Her comments will be monitored closely for any new insight on policy and the timing of when it might raise interest rates. Fed fund futures are pricing in less than a 15% chance of a rate hike in March, while odds of a June increase was seen at around 60%.

The U.S. central bank has previously projected three rate increases this year. However, traders remained unconvinced, with markets continuing to price in just two rate hikes during this year.

2. Dollar declines on political change

The dollar declined on Tuesday as caution set in before testimony from Federal Reserve chief Janet Yellen and after President Donald Trump's national security adviser Michael Flynn resigned unexpectedly.

The dollar deepened losses against a basket of major currencies after news broke that Flynn was stepping down amid concerns over the White House national security adviser’s Russian contacts.

The dollar index was down around 0.2% at 100.82 in early New York morning hours, pulling back from Monday's high of 101.11, which was its strongest level since January 20. USD/JPY was down around 0.4% to 113.31, off Monday's high of 114.17.

3. Global stocks turn red

U.S. stock market futures pointed to a modestly lower open on Tuesday morning, one day after equity indexes hit record highs, as traders eyed earnings, data and Fed Chair Janet Yellen's testimony.

Meanwhile, European stocks declined, heading for their first drop in six sessions, after economic growth data from Germany and the euro zone missed forecasts.

Earlier, in Asia, markets ended mixed, with the Shanghai Composite in China closing up less than 0.1%, while Japan's Nikkei slumped 1.1%.

4. Oil prices are capped

Oil prices bounced back from the prior session's losses on Tuesday, but remained trapped in a familiar trading range as market players continued to weigh the prospect of production cuts by major crude-producing nations against a rise in U.S. drilling.

U.S. crude was up 43 cents, or around 0.8%, to $53.36, while Brent tacked on 54 cents, or about 1%, to $56.13 a barrel.

Futures have been trading in a narrow $5 range around the lower-to-mid-$50s since December as sentiment in oil markets has been torn between hopes that oversupply may be curbed by output cuts announced by major global producers and expectations of a rebound in U.S. shale production.