The dollar edged higher, showing resilience despite some weak US data last week and hawkish comments from the European Central Bank. "Failure to sell-off on 'bad' news could well be interpreted as a sign of strength," Steve Pearson at HBOS said of the dollar. On Friday, it was revealed that the US economy created far fewer jobs than predicted. The week will also bring some figures and events which may have wide implications for the currency market. "First, Chinese money supply data are released at some point and could be the catalyst for a further tightening in monetary policy to accompany the recent Chinese yuan appreciation," said Pearson. "This would weigh on risk assets, including oil, to the benefit of the dollar," he added. Meanwhile, the Bank of Japan is widely expected to end its zero interest rate policy on Friday. There is some speculation about how much of a hike will be delivered. "With the Japanese government clearly opposed to a rate increase and the GDP deflator still negative, we suspect the BoJ will opt for a smaller than expected calibre of rate hike," said Pearson. He predicts a hike in the region of 10-15 basis points as opposed to the widely expected 25 basis point move. If he is proven correct, the yen will likely fall. Over in the US, attention will be on the US trade data on Wednesday. Any improvement will help the dollar rise. Analysts polled by AFX News predict a widening to 65 bln usd from 63.4 bln usd in April, however. The euro, meanwhile, was propped up by expectations of interest rate rises in the 12-nation area over the coming months after the decidedly hawkish tone struck by the European Central Bank last week. Markets are pricing in a quarter point rate hike at the ECB's next rate decision on August 3. Previously investors were plumping for an August 31 increase. The change came after ECB chief Jean-Claude Trichet signalled "strong vigilance" on the inflation front. The ECB has already raised the benchmark refi rate three times since December last year, taking the rate to 2.75 pct from 2.00 pct previously. Many now predict that the refi rate will keep rising until it hits 4.00 pct at the end of the first quarter of 2007 Analysts at BNP Paribas pointed out that the heightened expectations leave the euro vulnerable. "Since the euro money market curve is aggressively priced, euro markets face the risk of rate expectations easing in the case of data not coming in as strong as the 4 pct rate projection requires," they said in a note. The economic calendar this week is light for euro zone data but each indicator will be watched closely to see if it warrants rate hikes. The two top tier data this week are industrial output figures from France and Italy. The former, out today, exceeded expectations, rising by 2.0 pct between May and April. Analysts had predicted a more modest gain of 1.5 pct. Meanwhile, the ECB's monthly bulletin, due Thursday, is expected to confirm strong economic activity and rising inflation risks. Elsewhere, the pound was little changed after data showing that producers are passing on price increases and that house prices are rising. "The producer price output inflation data will not please the Bank of England," said Howard Archer at Global Insight. "Manufacturers in some sectors have been able to take advantage of recently firmer demand to push through more of their increased costs and help their tightly squeezed margins," he added. Still, there is yet little to indicate that prices on the high street are rising.