Risk sentiment has deteriorated somehow at the start of the week, with Asian equity markets mainly closing lower. Still, major indexes in Europe stay afloat, trading marginally higher on Monday. US stock index futures struggle ahead of the opening bell, but the selling pressure looks limited at this point. Against this backdrop, the dollar managed to attract some safe-haven demand earlier in the day.
However, the USD index failed to preserve gains and turned slightly lower to settle back below the 95.50 regions ahead of the North American session as profit-taking took the price from daily highs seen around 95.63.
The index was last seen changing hands around 95.43, less than 0.1% lower on the day. Still, the greenback could yet regain the upside momentum later this week if the upcoming US CPI report shows that the consumer price index jumped 7.35 in January from a year ago, the most significant year-over-year gain in 40 years.
In this scenario, the figures would fuel market bets that the Federal Reserve will start hiking rates in March with a 0.5% jump.
Rising expectations for more aggressive tightening would, in turn, add to the dollar’s bullishness and may push the USD index back above the 95.70 zone, followed by the 96.00 figure. Furthermore, the safe-haven demand for the greenback could reemerge at any point as geopolitical uncertainty surrounding Ukraine and US-China trade relations remains elevated.
Earlier on Monday, US officials said that "patience is wearing thin" in trade talks with China and called for "concrete action" from Beijing on the trade deal.