The US dollar gains positions at the start of trading in Europe this Thursday, continuing its seemingly relentless upward trajectory on expectations of further sharp rate hikes by the Federal Reserve following the release. of the latest red-hot inflation data.

At 9:15 AM ET, the dollar index , which tracks the dollar against a basket of six other major currencies, was up 0.6% at 108.430, just below two-decade highs. registered at 108,560 earlier this week.

The gains followed the release of June US CPI data on Wednesday , which soared 9.1% year-on-year to hit new four-decade highs.

This has fueled expectations that the Federal Reserve could {{l-168|||hike rates}} a whopping 100 basis points at its meeting this month, instead of the anticipated 75 basis points.

These expectations were reinforced by statements by Federal Reserve Bank of Atlanta President Raphael Bostic, who said that “we have done everything in our power” to combat price pressures, implying that a full percentage point was a clear possibility.

Additionally, Federal Reserve Bank of Cleveland President Loretta Mester has told Bloomberg that the central bank will have to go far beyond the neutral level of rates to combat rising inflation.

The EUR/USD pair is down 0.4% to the 1.0017 level, after briefly dipping below parity on Wednesday for the first time since late 2002.

The European Commission will announce new economic forecasts in the course of this day and is preparing to drastically lower its forecasts in terms of GDP for 2022 and 2023, according to a draft of the forecasts to which Bloomberg has had access, due to the war in Ukraine , rising prices and the danger of energy shortages in winter.

This puts the European Central Bank in a tight spot, as a weaker currency risks further fueling inflation already at record highs, but any move by the ECB to respond with its own version of rapid rate hikes rate would increase pressure on an economy already heavily burdened by high energy costs.

The USD/JPY pair is up 1% to the 138.72 level, reaching its highest level since September 1998, after the US 2-year Treasury yield rose to as high as 3.1964%, just above its four-week highs overnight, and well above the 10-year US Treasury yield of 2.9340%.

The USD/CAD pair is up 0.4% to the 1.3018 level, with the greenback recovering some ground after the Bank of Canada surprised markets on Wednesday with a one percentage point gain as it the central bank believes that interest rate hikes need to be brought forward to ensure that high inflation does not take hold.

AUD/USD is down 0.6759 level, NZD /USD is down 0.3% to 0.6115, while USD/CNY is up 0.3% to 6.7411 level.