The US Dollar increased against major rivals on Monday as inflation fears reappeared following an announcement by OPEC+ of further cuts to production targets.

Sunday’s announcement led oil prices to rise by around 8% in early Monday trade in Asia. At the time of writing, Brent crude was trading at $84.12 per barrel, a 5.3% increase.

During the meeting, OPEC+ had been expected to remain with cuts of 2 million barrels per day (bpd) already in place until the end of the year. Yet further cuts were announced of up to 1.16 million bpd, Reuters reports.

“A higher oil price will put pressure on global inflation, and if we assume the banking turmoil continues to reside, then the markets will increasingly focus on the inflation outlook,” stated Mohamad Al-Saraf, Associate, FX and Rates Strategy at Danske Bank.

As it stands, markets are now pricing in around a 70% chance the US Federal Reserve will increase rates by 25 basis points next month, compared to a forecast 50% chance last Friday. However, by the year-end, expectations for cuts of 40 basis points are priced in.

“With oil prices going up, it could be a trigger to reverse Fed rate cut pricing,” Al-Saraf went on to say.

In addition, the Euro fell 0.1% to $1.0835, after hitting a one-week low of $1.0788 previously in the session, whilst the greenback edged up 0.5% to 133.57 Japanese Yen, having earlier reached its highest since 17th March. 

Moreover, the Sterling stood at $1.2317 at the time of writing, a 0.1% fall on the day, whilst the Dollar gained 0.3% against the Swiss Franc.

In Australia, the Aussie last rose 0.1% to $0.6693 ahead of Tuesday’s central bank policy meeting. Markets forecast an 85% chance the Reserve Bank of Australia will stand pat on interest rates following ten rate hikes. At the same time, the New Zealand Dollar declined 0.4% to $0.6230.