Peter Nurse

Investing.com — The U.S. dollar edged higher Monday, helped by the strong U.S. jobs data, while the euro edged off Friday’s three-week peak as traders continued to digest the European Central Bank’s hawkish turn. 

The, which measures the greenback’s performance against six currencies in a basket, edged 0.1% higher at 95.615 GMT (02:55 ET)

The dollar has been helped by Friday’s very strong , with 467,000 nonfarm jobs added in January, way more than expected, while, even more strikingly, the government revised up payroll data for November and December by a combined total of over 700,000.

Marc Chandler (Chief Market Strategist, Bannockburn Global Forex) said that rate rise expectations have been boosted by this. “The market sees more than an almost 45% chance of a 50 bp hike in March and nearly 145 bp of tightening over the next 12 months. At the end of last year, about 85 bp of tightening was discounted.”

Expectations could be supported by Thursday’s U.S. data, which shows both core and headline monthly CPI values rising 0.5% each, for annual figures of 7.3% & 5.9%, respectively. 

Its status as a safe haven is another benefit to the dollar, following Sunday’s White House warning that Russia might invade Ukraine. Diplomacy continues to struggle to control the situation, even though President Emmanuel Macron of France travels to Moscow.

The euro has drifted lower Monday, with trading 0.1% lower at 1.1432, having hit its highest level since mid-January on Friday after the European Central Bank expressed more concern over the region’s inflationary pressures than expected last week.

The Dutch president of the central bank and a member the European Central Bank’s Governing Council continued this theme Sunday by stating that he expected the ECB will raise interest rates during the fourth quarter.

Despite this, Knot is regarded as one of most hawkish members the ECB’s boards. A wider variety of board members will be needed to convince Knot before the central banking raises interest rates.

“The ECB found its inner hawk and joined many other central banks in hinting at tightening ahead. We note that the inflation outlook remains very uncertain but conclude that market pricing has become too aggressive,” said analysts at Nordea, in a note.

Elsewhere, rose 0.1% to 1.3542, just off the two-week high of 1.3626 reached on Thursday after the Bank of England raised rates by 25 basis points, edged higher to 115.23, while the risk-sensitive rose 0.4% to 0.7105, rebounding from last week’s selling after Reserve Bank of Australia Governor Philip Lowe preaching patience in terms of rate hikes.