Traders are optimistic given the uncertainty that is in store for the markets. – Copyright GETTY IMAGES NORTH AMERICA/AFP SPENCER PLATT

Asian markets rebounded in early trade Monday, building on momentum from gains in the United States and Europe late last week as investors priced in expectations of more rate hikes to curb inflation.

Stocks in Japan, Australia, Singapore, Taiwan and Jakarta rose sharply, while markets in Hong Kong, China and South Korea were closed for a public holiday.

The euro continued to strengthen against the dollar as investors in Europe weighed the prospects of the European Central Bank (ECB) following the US Federal Reserve’s lead in raising interest rates.

Bundesbank President Joachim Nagel signaled on Sunday that the ECB is likely to raise interest rates further in order to curb runaway inflation.

Nagel predicted that inflation in Europe could peak at over 10 percent in December.

The ECB raised interest rates by a historic 75 basis points last week and markets expect a similarly large hike at an October meeting.

This week, investors around the world will be keeping a close eye on US inflation data for August, due to be released on Tuesday, with the consumer price index (CPI) expected to ease slightly to 8% – still well above the Fed’s 2% target.

Traders expect the Fed to issue another big rate hike next week after already two 75 basis point hikes.

“A surprise downside in US CPI is probably of more concern, and that could lead to further weakening of the dollar,” Charu Chanana, strategist at Saxo Capital Markets, told Bloomberg Television.

“We saw some glimpses of it… late last week. That could potentially be a risk to watch especially this week.”

– Hopes for “soft landing” –

On Sunday, US Treasury Secretary Janet Yellen said she was confident the US economy could avoid a recession but that the Fed was good at managing interest rates and also…