The dollar strengthened early in the week as traders bet that U.S. inflation data and speeches by Federal Reserve officials would lead to higher interest rates.
On Friday, the safe-haven currency fell against major currencies but rose against them again on Monday as traders made long bets towards the greenback.
Jerome Powell and Lael Brainard will also appear this week before Senate committees regarding their nominations for Federal Reserve chair and deputy chair, respectively.
On Powell’s likely hawkish commentary and rising U.S. inflation, traders anticipate that the dollar index will recoup some of its Friday losses this week. For Wednesday, U.S. inflation is forecast to climb to 7%, a red-hot rate.
However, some currency strategists stressed that the greenback would soon exhaust its power, and the index would reach 94 points once the March rate hike is priced in.
At the time of publishing, the dollar index was up 0.2% at 95.912 index points
There are also worries about the U.S.-Russia talks over rising tension in Ukraine as the two sides appear to be far apart, and an armed confrontation could happen right on Europe’s doorstep.
A weaker-than-expected U.S. job-creation figure squeezed traders out of long dollar positions, the dollar suffered some selling late last week.
However, analysts said better-than-expected unemployment data still paves the way for a hike sooner rather than later.
CME’s FedWatch tool indicates that traders have priced in a nearly 80% chance of another rate hike by June.
As well as sterling, the dollar was marginally weaker but the British pound has been rallying amid expectations that the Bank of England (BOE) will hike at the same time as the Federal Reserve.
On the euro, it was trading near last week’s two-year peak and near a two-month high at $1.3586. Currency strategists believe traders are too hawkish on interest rate expectations in Britain, but sterling will still hold its own.
Despite the BOE’s two rate hikes, market pundits still expect EUR/GBP to remain under modest downward pressure, resulting in GBP/USD rising to around 1.4.
After bitcoin managed to hold support at $40K through weekend trade, crypto-assets were steady in London, despite widespread selling in risk assets at the beginning of this year. Bitcoin last traded at $42K and ether at $3.1K.