The dollar dipped on Monday, giving up previous gains after OPEC+ announced surprise cutbacks in oil supply, as investors focused on divergent central bank policies, with the Federal Reserve largely considered as nearing the end of its rate-hike cycle.

The impact of oil output reduction, on the other hand, has muddled the global inflation forecast.

The Organization of the Petroleum Exporting Countries (OPEC) and its partners, known as OPEC+, announced output goal cutbacks on Sunday, causing oil prices to rise by approximately 8% in early Asian trade on Monday. Brent crude was recently trading at $84.48 a barrel, a 5.8% increase.

The dollar initially rose after the announcement.

OPEC+ had been expected to stick to cuts of two million barrels per day (bpd) already in place until the end of 2023, but instead announced further output cuts of around 1.16 million bpd.

“The knee-jerk reaction is fading as markets pivot back toward the deeper disinflationary fundamentals that are likely to drive the monetary policy outlook,” said Karl Schamotta, chief market strategist at Corpay in Toronto.

“Central banks are thought likely to stay focused on growth, employment, and core inflation measures, which reflect energy prices at a long lag, so market-implied odds on rate cuts are reverting toward pre-production cut levels. Rate differentials are correspondingly turning back against the dollar,” he added.

On Monday, federal funds futures priced in a 65% chance of another 25 basis-point (bp) U.S. rate hike in May and a pause in June . Futures traders have also factored in rate cuts by December.

Data released on Friday showed an acceleration in core price growth in the euro area, which analysts said should strengthen the case for more rate hikes from the European Central Bank, while a measure of core inflation in the U.S. came in a shade lower than expected at 4.6%.

“Interest rate differentials are the main driver for euro-dollar,” said Niels Christensen, chief analyst at Nordea.

Traders are pricing in around 60 basis points of further tightening from the ECB by the end of the year.

The euro was last up 0.2% at $1.0866, after touching a one-week low of $1.0788 earlier in the session.

The dollar index , which measures the currency against a basket of six currencies including the euro, was down 0.5% at 102.94.

Focus this week will be on U.S. activity data and Friday’s jobs report, although many markets will be closed for the Easter holiday.

“If we get firm data from the U.S., the markets may have to revise rate hike expectations and the dollar may get some support,” Nordea’s Christensen added.

Against the Japanese currency, the dollar rose 0.2% to 132.99 yen , after earlier hitting its highest level since around mid-March.

Sterling was at $1.2379, up 0.4% on the day, while the dollar was slightly lower against the Swiss franc at 0.914 francs.

Oil-sensitive currencies, such as Norway’s krone , and the Canadian dollar were beneficiaries of rising oil prices.

The risk-sensitive Australian dollar was last up 1.2% at US$0.6763 ahead of a policy meeting at the Reserve Bank of Australia on Tuesday, with markets placing around an 85% chance the central bank will stand pat on interest rates after 10 hikes. The Aussie dollar earlier hit a one-month high versus the greenback.