Dollar rises to 7-month high as European markets opened lower

European markets opened lower on Monday with the dollar holding firm near a seven-month high after comments from Federal Reserve Chair Janet Yellen, as investors remain cautious ahead of earnings, key data and a European Central Bank (ECB) meeting later this week.

The pan-European STOXX 600 was down 0.31 percent with all major bourses in negative territory.

European stocks followed the cautious tone set in Asia as traders mull future policy decisions by major central banks.

In a speech on Friday, Yellen said policymakers might want to consider the benefits of a “high pressure economy” and let inflation continue to rise.

This helped the dollar rise against a basket of major currencies on Monday, touching its highest level since March before paring some gains, while the 30-year U.S. Treasury yield hit a four-month high.

Some analysts suggested that Yellen’s comments could suggest a looser for longer monetary policy stance, but others said that a December interest rate hike is still on the cards given positive retail sales and employment data from the U.S. in recent weeks.

“Nothing in last week’s U.S. economic data appears to have altered expectations that the Federal Reserve will look to raise interest rates by the end of this year, probably at its meeting in December,” Michael Hewson, chief market analyst at CMC Markets, said in a note on Monday.

“The currency markets already appear to be pricing in just such a prospect with the U.S. dollar index closing at its highest level since early March.”

Investors will also be looking ahead to the ECB meeting on Thursday with hopes that President Mario Draghi could give some hints as to whether the central bank might extend its quantitative easing program which is set to end in March 2017.

Elsewhere, the banking sector will be in focus after shareholders approved a merger between Italy’s Banco Popolare and Banca Popolare di Milano (BPM) on Saturday.