The U.S. dollar inched up in early European trade on Monday, recovering from last week's one-year low as robust earnings from major Wall Street banks alleviated concerns about the sector. This has led to increased expectations of the Federal Reserve implementing another interest rate hike. The dollar index, which measures the currency against a basket of six other currencies, was up 0.1% at 101.360.
Despite worries about inflation cooling down and the Fed expressing concerns about the banking sector's weakness potentially leading to a mild recession, traders had started to anticipate a pause in the central bank's rate-hiking cycle in May. In the coming days, investors will have an opportunity to hear from more Fed officials before the blackout period ahead of the meeting, including New York Fed President John Williams, Governor Michelle Bowman, and Governor Lisa Cook. Currently, most investors anticipate a 25-basis point rate hike at the next policy meeting on May 3.
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