The U.S. dollar gained in early European trade Monday, rebounding from losses after Friday’s payrolls data ahead of this week’s release of inflation data from the world’s two largest economies.

At 03:05 ET (07:05 GMT), the Dollar Index, which tracks the greenback against a basket of six other currencies, traded 0.2% higher at 102.082, climbing away from Friday’s low of 101.73.

Dollar rebounds ahead of key inflation data
The U.S. economy added fewer jobs than expected in July, data on Friday showed, resulting in the dollar falling to a one-week low against a basket of currencies.

However, the jobs report also showed solid wage gains and a decline in the unemployment rate, indicating that the labor market remains tight and inflationary pressures remain.

With the Federal Reserve clearly looking at the incoming data ahead of September’s policy meeting, the attention now turns to Thursday’s U.S. inflation data release for guidance.

Lower numbers would make it more likely that Fed policymakers will hold off raising interest rates at their upcoming September meeting after a quarter-percentage-point hike last month, but expectations are for core inflation to have risen 4.7% on an annual basis in July.

Yuan weak amid deflation concerns
USD/CNY rose 0.7% to 7.1923, with the yuan weak ahead of Tuesday’s Chinese inflation data, with consumer inflation set to fall 0.5% on an annual basis in July, while producer inflation is likely to have contracted further.

Markets were also focused on more cues from the Chinese government on its plans to stimulate economic growth after officials offered few concrete details on their planned spending measures.

German industrial production slumps
EUR/USD fell 0.3% to 1.0979 after German industrial production slumped 1.5% on the month in June, a dramatic fall from the revised slip of 0.1% the prior month.

The European Central Bank hiked interest rates earlier this month, but signs that the German economy, the largest in the eurozone, is still struggling could prompt the ECB policymakers to call a halt to its tightening cycle in September.

U.K. house prices fall again
GBP/USD fell 0.2% to 1.2724 after data from mortgage lender Halifax showed that British house prices fell in July for the fourth time in a row in month-on-month terms, dropping by 0.3% from June and in year-on-year terms they were down by 2.4%.

The U.K. is to release second quarter GDP data on Friday which is expected to tick fractionally higher, indicating that the overall economy remains all but stagnant.

Elsewhere, USD/JPY rose 0.4% to 142.34, even as some members of the Bank of Japan warned that inflation could overshoot expectations this year.