Inflation rises - a positive for the dollar?

Inflation is high
The Labor Department reported Thursday that consumer prices rose by 0.8 percent last month, twice the 0.4 percent gain that economists had been expecting.

Bullish dollar, bearish stocks
I see this as bullish for the dollar as the market will price in Fed Rate Hikes sooner rather than later and combined with the bad news in the financial sector (yet again!) bad for the stock market. I think that euroland will have lower inflation as will other countries who havent cut rates as aggressively as the US. Hence the dollar will climb.....

The volatility numbers on currencies-my trading view
The 1 week implied volatility i.e. the options market's estimate of the expected movement in the next coming week for EURUSD has risen to 11.50 % while the realized volatility was 14.63% last week. Interestingly, implied volatility has been paying for itself for the last 20 days- the pnl of selling1 week straddles has been negative. While the gamma sellers will jump into the market and probably the realized gamma will go down, I think there is a trade here that combines the dollar view and the gamma view- a risk reversal. i.e. I think the EURUSD upside volatility is worth selling and downside is worth buying. Volatility will die if the Euro climbs back up so the EUR call you are short won't be worth very much and volatility will rally if the dollar gains in which case your option will be worth something....

Overall market
I still think credit card companies and other luxury goods that may be affected by low credit are vulnerable.