USD traded lower against its major counterparts in the European session on Tuesday as risk sentiment improved further, after the U.S. House of Representatives supported President Donald Trump's proposal to increase the direct payments in the latest stimulus package.

Late Monday, the Democratic-led House of Representatives voted 275-134 in favour of increasing stimulus checks for Americans to $2,000 from the $600 in the legislation that Trump signed into law on Sunday. President originally criticized the pandemic relief package, which was approved by Congress last week, describing it as a "disgrace" and demanding to boost stimulus checks. Now, the bill goes to the Republican-controlled Senate, where its future is in question, as the lawmakers remain divided on the necessity of providing deeper relief for struggling Americans. 

The House lawmakers also voted to override Donald Trump's veto of a $740 billion National Defense Authorization Act that was approved by Congress earlier this month. The Senate is to take up the legislation later in the week, and it is expected to pass.

The U.S. Dollar Index (DXY), measuring the U.S. currency's value relative to a basket of foreign currencies, dropped 0.36% to 90.01, the lowest levels since April 2018. The CFTC data showed that short positions in the  U.S. currency reached the highest levels in at least three months.