USD strong at the start of the week
Focus shifts to US inflation data
Inflation data will determine the next interest rate expectation
The US currency king dollar gained support to rise in early trading of the week as investors now focus on US inflation data due out on Tuesday.
It is important for investors to know about inflation because it will determine the direction in the setting of monetary policy of the Federal Reserve (Fed) policy further.
US consumer prices are forecast to continue to decline but at a slower pace from 6.5% to 6.2% year-on-year in January.
Earlier, Fed Chairman Jerome Powell had said that the inflationary pressure in the country is beginning to decrease (disinflation) and this provides an opportunity for the central bank to implement an interest rate increase of 25 basis points at the February meeting.
Even so, a strong US jobs report in non-farm payrolls (NFP) has undermined investor confidence for the Fed to end its tightening.
In fact, Powell also said that if the jobs data is strong and inflation remains consistently high, he expects interest rates to rise higher than expected.
This factor is one of the drivers that helped the US dollar to rise from its lowest level following the policy meeting 2 weeks ago, and now the inflation data is the focus of investors for the next expectation.
At the time of writing, the dollar index which measures the strength of the greenback was trading 0.2% higher at 103.81 against most major currencies.
Also in the focus of investors this week was the UK inflation data released on Wednesday, which saw the pound trade lower in the Asian session.
The yen, on the other hand, wiped out all the gains made on Friday as investors continued to follow developments regarding the candidate to be appointed as the next governor of the Bank of Japan (BOJ).
