Peter Nurse

Investing.com: The U.S. Dollar edged higher Monday morning as traders expected the release of important U.S. inflation figures this week, which will boost chances for early Federal Reserve rate increases. 

The Dollar Index (which tracks the greenback in relation to a basket six currencies) traded 0.2% lower at 95.915.

The stock market rose 0.2%, to 115.78. This is close to the five-year peak of 116.35.

The greenback is recovering from Friday’s hit after a weaker-than-expected U.S. for December, with attention now firmly switching towards the release of key December inflation data.

“The key for Fed policy now is not the labor market but inflation, and this week’s December CPI report is expected to show further acceleration,” said Marc Chandler, Chief Market Strategist at Bannockburn Global Forex.

“Even after the employment report, the December Fed Funds contract showed increased wagers of four hikes this year. The probability of a fourth hike is now slightly over 50% compared with a 40% of a third hike after the November jobs report on December 3.”

CPI headlines are expected to rise above 7% in the data on Wednesday. This is close to a record four-decade high. The same is true for data from Wednesday.

Senators will hear testimony from Jerome Powell, Fed Chairman and Governor of the Fed, and Lael Brainard regarding their nominations to be Fed Chair and Vice-chair respectively.

The Fed will pay close attention to their remarks about the potential central bank tightening monetary policy in the coming year. They are the highlights of a week that will include many Fed speakers.

Also helping the dollar Monday are the continued tensions between the U.S. and Russia, primarily, over the former Soviet state’s intentions towards Ukraine.

Negotiations between the principals of the countries begin Monday in Geneva and then move to Brussels or Vienna. But Russia declared on Sunday that they would not give up under U.S. compulsion and threatened to end the talks early.

Elsewhere, rose 0.3% to 4.3613 with Romania’s central bank expected to lift interest rates later Monday to try and tackle soaring inflation in line with its peers in the region. 

Bloomberg surveyed six economists who saw the central bank raising its benchmark rate to 2.25% by increasing it by 50 basis points. Other five economists predicted a rise of 2%. Poland raised its interest rate this year.