The Dollar recommenced its rally on Tuesday after falling against the Pound and Euro the day before, now back on course for its first monthly gain since September.

USD's rally has gained momentum over the past few weeks as optimistic data fuelled expectations the Federal Reserve will have to hike rates more than the first forecast.

The Dollar index – measuring the greenback against six rivals – stood flat at 104.64, yet was still on track for a 2.6% gain in February, the first since September, Reuters reports.

"The Dollar has made its rebound – fully justified – on the strength of the January numbers that came through in February and the repricing for the Fed," stated Ray Attrill, head of FX strategy at National Australia Bank, in reference to the recent robust economic data coming out of the US. 

Investors now forecast the Federal Reserve's funds rate to peak at just over 5.4% by September, compared to a peak of 4.70% at the beginning of the month.

"I think we're sort of lurching from one major data point to another… The next move in the Dollar is really a function of how the February data starts to play out in March," Atrill added.

Furthermore, on Tuesday, the Dollar rose 0.44% against the Japanese Yen to 136.84, a more than two-month high.

In addition, the Pound continued the previous day's gains against the Dollar, up 0.2% to $1.2082 at the time of writing.

On Monday, the Sterling rose 1% as Britain and the EU announced the Northern Ireland deal. This improved the UK economic outlook, and Prime Minister Rishi Sunak said it marks the beginning of a new chapter in London's relationship with the EU, the Reuters report adds.

Following the announcement, the Euro was flat at $1.0611 after moving up 0.6% in the previous session.