The EUR/USD exchange rate fell 0.39 percent to $1.0734. The euro fell against the dollar on Tuesday, but it could recover as pressure mounts on the European Central Bank to take the most aggressive stance on rate hikes in its history as the fight against record inflation gets underway. 

Raising interest rates in 50-basis-point increments would be a first for the ECB. The central bank has not raised interest rates since 2011, and its benchmark rate has been negative since 2014. 

As indicated by Commerzbank, the euro “could possibly profit from higher expansion levels…as it has since become certain that the ECB…[is] able to act.” 

“”Now that it [the ECB] has signalled its willingness to act even more aggressively, 50bp rate steps do not appear to be impossible,” Commerzbank added, following data showing eurozone inflation hit a new high in May. 

Eurozone inflation rose to 8.1 percent in May, up from 7.4 percent the previous month, driven by rising energy and food costs as a result of the ongoing Russian-Ukrainian crisis. 

The data arrived ahead of the European Central Bank’s meeting next week, when the central bank is widely expected to announce plans to start raising interest rates in July. 

“The data, in my opinion, cement the necessity of taking the first step in raising rates,” Kazimir said in an interview published Tuesday by Reuters.

“My benchmark is 25 premise focuses [in July], however I’m willing to examine 50 premise focuses.”

The more hawkish ECB members’ mood contrasts with that of the central bank’s president, Christine Lagarde, who has indicated that quarter-point increases are likely at meetings in July and September.

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