Peter Nurse

Investing.com — On Tuesday the U.S. dollar was higher, finding support ahead of the release key inflation data in the latter part of the week. This could revive expectations of a prompt tightening from the Federal Reserve.

The, which measures the greenback’s value against six currencies in a basket, was 0.3% lower at 2:50 ET (0750 GMT) and traded at 95.685.

The dollar has made something of a comeback this week, after a strong bout of selling last week, as Friday’s very strong jobs report, with 467,000 recorded, fortified rate hike expectations for March.

“A surprisingly strong U.S. January NFP jobs report provided some support to the dollar and reminded us that the Fed is still likely to lead the hawkish re-assessment of central bank policy underway around the world,” said analysts at ING, in a note.

This expectation is likely to increase with Thursday’s U.S. publication.

“The U.S. CPI figure … is the main event for this week and it is set for another upbeat figure,” said analysts at Nordea, in a note. “The consensus points to a headline of 7.3% with underlying prices to reach 5.9%. Our models point towards an upside risk.”

Futures market prices almost 1% chance of March’s 50-basis point rate increase. A CPI number above a 4-decade high would further support the dollar.

Other currencies fell 0.3%, to 1.1401. This is further from the peak since mid-January, which was reached last week when the European Central Bank suggested that policy actions would be taken in the form rate increases later in the year.

In a speech on Monday night, the President of European Central Bank tried to temper these expectations. He acknowledged that inflation risks in Eurozone are increasing but also suggested that price pressures may still be reducing before they become entrenched.

Lagarde stated that the demand conditions within the Euro area are not as hot as those in major economies.

Also, the index fell 0.1% at 1.3525, and rose 0.3% by 115.52. The risk-sensitive however, dropped 0.1% from 0.7117 to 0.7117.

rose 0.4% to 3.9790 and climbed 0.1% to 4.5358, with Poland’s central bank likely to raise borrowing costs later Tuesday for a fifth consecutive month in an attempt to curb record inflation levels.