LONDON, April 3 Reuters The dollar trimmed its initial gains against major pairs in the course of Monday as investors focus on diverging central bank policy, with the impact of oil production cuts complicating the inflation outlook.

An announcement on Sunday of output target cuts by the Organization of the Petroleum Exporting Countries OPEC and its allies, known as OPEC, caused oil prices to jump by around 8 in early trade in Asia on Monday. Brent crude was last trading at 84 per barrel, up 4.10 or 5.1.

OPEC had been expected at a meeting on Sunday to stick to cuts of 2 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.

A higher oil price will put pressure on global inflation and if we assume the banking turmoil continues to reside then the markets will increasingly focus on the inflation outlook, said Mohamad AlSaraf, Associate, FX and Rates Strategy at Danske Bank.

The dollar, which had jumped on the surprise cut to output, slowly reversed course through the European morning to trade lower as attention turned back to central bank policy.

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 eurodollar, said…