The dollar rebounded in early European trading on Monday (10th), recovering some losses after the release of the US non-farm payrolls report, while weaker-than-expected Chinese inflation data weighed on the yuan.

U.S. dollar index futures, which measure the greenback against six trade-weighted major currencies, were up 0.09 percent at 102.043 as of 16:49 Beijing time (04:49 a.m. Et). The dollar index against a basket of six major currencies was up 0.13 percent at 102.41.

The benchmark U.S. 10-year Treasury yield was at 4.073%, while the 20-year yield was at 4.293%.

The weak jobs data weighed on the dollar, with focus shifting to the U.S. CPI

On Friday (7th), the US dollar fell sharply after the release of the non-farm employment report. The report showed U.S. employers added the fewest jobs in two and a half years, adding 209,000 jobs for the first time in 15 months, falling short of market expectations and raising questions about whether the Fed will need to raise interest rates twice more to slow the economy enough to bring down inflation.

However, according to the report, wage growth, an important factor supporting inflation, remained strong.

Attention now turns to Wednesday's release of the June consumer price Index (CPI), which analysts expect to show the lowest annual rate of consumer inflation since March 2021.

"The big risk event for the dollar this week is Wednesday's June inflation report," analysts at ING said in a note.

"Our economists generally expect core inflation to come in at 0.3 per cent per month, which should continue to provide encouraging news for the de-inflation narrative, but still not enough to push the Fed to adjust its stance or persuade the market to tone down expectations for a rate hike in July."

In addition, several Federal Reserve officials will speak this week, They include Minneapolis Fed President Neel Kashkari, Cleveland Fed President Loretta Mester, San Francisco Fed President Mary Daly and Fed Governor Christopher Waller.

Chinese inflation data were weak

The yuan weakened to its level at the end of last year, with the onshore yuan up 0.19 per cent against the dollar at 7.2350. The dollar was up 0.13 percent against the offshore yuan at 7.2405. Meanwhile, China's 10-year government bond yield was at 2.694 per cent.

Earlier data showed China's producer price index (PPI) hit a 7-1/2 year low in June, and the June consumer price index (CPI) was -0.2% month-on-month.

Still, analysts think PPI may have bottomed out. Pang Ming, chief economist and director of research at Jones Lang Lasalle Greater China, said that the year-on-year decline in PPI, in addition to the continuing decline in commodity prices and the continued drag factor of high base effect, also reflects the reality that the momentum of the real estate and construction chain and the intensity of industrial production are still weak. However, the probability of PPI year-on-year decline has reached the bottom and is expected to gradually narrow in the second half of the year.

In addition, CITIC Securities believes that the main reason for China's low inflation environment is the cyclical price reduction of individual commodities and the differentiation of the pace of supply and demand repair, but the current money supply is sufficient, the economy is in the repair stage, so there is no risk of deflation.