The U.S. dollar rose further against the Japanese yen in early European trading on Monday, but strong nonfarm payrolls data from the U.S. last week signalled further aggressive monetary tightening by the Federal Reserve.

At 3:05 AM ET (0705 GMT), the Dollar Index, which tracks the greenback against a basket of six other currencies, traded 0.1% lower at 106.435, edging back from Friday’s peak of 106.93, the strongest level since July 28.

However, USD/JPY climbed 0.2% to 135.40, just off the 135.58 level seen earlier Monday, which was the highest level also since July 28.

The main reason for the move was July’s blistering US jobs data, which saw nonfarm payrolls rise by more than 500,000 last month, more than double expectations.

This indicated that the country’s job market remained strong even after a series of large rate hikes to combat inflation, and that the Federal Reserve gave the green light to proceed with a significant rate hike in September.

This helped U.S. Treasury yields push higher, with the 10-year yield trading at 2.82%, close to the two-week high of 2.869% touched Friday.

All eyes will be on Wednesday’s US CPI release. In line with the 75 basis point hike the Fed last saw, another big number is likely to rise further.

The July CPI figure is expected to ease to 8.7% on an annual basis from 9.1% previously, but the core CPI, which excludes volatile food and energy prices, is expected to increase by 0.5% month-over-month, pushing the annual rate up to 6.1% from 5.9% in June.

EUR/USD edged lower to 1.0178, struggling to benefit from the risk-on sentiment seen in the stock markets after Moody’s cut its outlook on Italian debt to negative following the resignation of the highly regarded Mario Draghi as prime minister, throwing Italian politics into turmoil.

GBP/USD rose 0.1% to 1.2080, with the pound vulnerable to further selling after falling to 1.2003 on Friday, a day after the Bank of England warned of a possible prolonged recession starting later this year.

UK GDP for June and Q2 is due out on Friday and is expected to show a sharp 1.2% slowdown in the same month as the country faces a severe cost of living crisis.

AUD/USD gained 0.4% to 0.6934, while USD/CNY edged higher to 6.7638 after China’s exports rose 18.0% in July from a year earlier, the fastest pace this year, as the country struggles to recover from the COVID related recession.