Euro climbed in European trade against the pound for another session, almost touching two-week highs amid positive outlook for the euro zone economy. 

Speculation is spreading about a rapid pace of rate hikes by the European Central Bank, while negative outlook in the UK continue to pressure the pound. 

EUR/GBP rose 0.2% to 0.8892, with a session-low at 0.8856, after rising 0.5% yesterday against the pound yesterday, the fourth profit  in five days following bullish remarks by ECB officials. 

EUR/GBP hit two-week highs earlier this month at 0.8896 following high European inflation data.

European Rates

Recent bullish remarks by ECB officials bolstered the case for multiple more rate hikes following the expected 0.5% hike in March. 

Estonian Central Bank President Madis Müller said the ECB must hike rates and maintain them at high levels for an extended duration to contain inflation, asserting the March rate hike won't be the last.

Similarly, National Bank of Belgium President Pierre Wunsch said the ECB must do more as inflation remains too high with no clear signals of decline so far.

He expects European rates to surpass 4% this year, noting that inflation movements are the main determinant of the path forward for the ECB.

UK Rates

Currently, Bank of England is the least bullish of the major western banks following bearish remarks by Governor Andrew Bailey, pressuring the pound. 

Bailey nonetheless asserted there still remains multiple rate hikes by the BoE until inflation is brought back under control.

The BoE is expected to hike interest rates by 25 basis points in March, while neutral interest rates are expected now at 4.75% this year, down from 5%. 

Estimates

Analysts believe it to be difficult for the BoE to go in the same pace as the ECB as the British economy faces heavier struggles. 

The EUR/GBP is expected to find support following the 0.8900 level for the time being as momentum rises on the side of the common currency.

The Reserve Bank of Australia decided to increase interest rates by 25 basis points today as expected by market analysts to 3.60%, the highest since May 2012, from 3.35%5 at the previous meeting.

It's the tenth rate hike in a row in order to control inflation in Australia, which showed signs of response recently to the RBA's measures. 

The RBA expects interest rates to reach 4.1% this year with two more rate hikes and to remain stable afterwards. 

Euro rose in European trade for the third straight session against dollar, hitting two-week highs on bullish remarks by ECB officials which bolstered the case for multiple more rate hikes after the expected 0.5% hike in March.

Dollar is extending its losses ahead of Fed Chair Jerome Powell's speech ahead of Congress, expected to include clues on the future path of policies in the US.

EUR/USD rose 0.2% to 1.0694, the highest since February 21, with a session-low at 1.0674.

Euro rose 0.4% yesterday against the dollar following strong European consumer prices data.

European Remarks

Estonian Central Bank President Madis Müller said the ECB must hike rates and maintain them at high levels for an extended duration to contain inflation, asserting the March rate hike won't be the last.

Similarly, National Bank of Belgium President Pierre Wunsch said the ECB must do more as inflation remains too high with no clear signals of decline so far.

He expects European rates to surpass 4% this year, noting that inflation movements are the main determinant of the path forward for the ECB. 

And finally, ECB President Christine Lagarde said it's very probably that the ECB will increase interest rates by 50 basis points in March.

She said the bank will continue to take aggressive measures to bring inflation back to the 2% target.

The Dollar

The dollar index fell 0.2% on Tuesday for the third straight session against a basket of major rivals.

Fed Chair Jerome Powell is speaking today ahead of Congress, expected to offer clues on the path forward to control inflation in the US.

Gold prices fell on Monday even as the dollar declined ahead of important developments this week. 

The Fed

Firstly, investors await Fed Chair Jerome Powell's testimony ahead of Congress this week.

Investors hope to gather clues from Powell about the future policy directions for the Federal Reserve.

It's widely expected the Fed will maintain its policy tightening efforts to contain inflation.

The Labor Market

Investors also await crucial data on the US labor market, including private sector data, and the important payrolls report on Friday.

Wall Street also benefited from a tumble today in US 10-year treasury yields to 3.91%.

Otherwise, the dollar index fell 0.1% to 104.3 as of 19:36 GMT, with a session-high at 104.6, and a low at 104.1. 

Gold spot prices fell 0.2% as of 19:37 GMT , or $3.20 to $1,851.40 an ounce.