Euro at highest to yen since 2008, markets nervy over Toyko stepping in

That was in sharp contrast to just a few weeks ago when markets were betting on June for the U.S. monetary easing cycle to begin, a shift that has driven the dollar higher, Reuters reported.

The pound dropped to a five month low of $1.2299 against the dollar on Monday, though it was last at $1.234, as strong British business activity data helped it to steady.

Investors will have another chance to assess the strength of the U.S. economy this week, with first-quarter gross domestic product data on Thursday and personal consumption price expenditures (PCE) index, the Fed’s preferred measure of inflation, on Friday.

“It is conceivable that markets further push back the timing of the expected first rate cut from September, if this week’s GDP and/or PCE adds to concerns about disinflation stalling. The risk therefore lies towards higher U.S. yields and a stronger USD,” said Carol Kong, currency strategist at Commonwealth Bank of Australia.

Markets forecasts are for a 0.3% increase in the headline PCE number in March, unchanged from the previous month, and a year-on-year gain of 2.6%, compared with a 2.5% increase in February, according to a Reuters poll.