The Euro edged up on Tuesday, benefiting from support from the European Central Bank’s (ECB) plans to hike rates to curb soaring inflation.

The single currency rose 0.5% to $1.0563 after the Chief Economist at the ECB, Philip Lane said the bank will increase rates by 25 basis points at next month’s meeting. However, the size of the September increase has not yet been decided, indicating a larger 50-point rise may be looming.

In addition, ECB policymaker Francois Villeroy de Galhau commented that the “planned instrument against financial fragmentation must allow it to back up its commitment to defend the Euro,” Reuters reports.

“The pledge to deal with fragmentation makes it easier for the ECB to raise rates because they can do so while keeping a particular eye on one or two troubled markets,” according to Marshall Gittler, Head of Investment Research at BDSwiss.

Furthermore, the Dollar increased 0.2% to 135.35 Yen, not too far from a 24-year high of 135.60 Yen reached last week, as the Bank of Japan maintained its ultra-easy monetary stance.

Measuring the greenback against six major rivals, the Dollar index fell 0.3% at 104.10, as the focus turns to the testimony to Congress by Federal Reserve Chair Jerome Powell, getting underway on Wednesday.

“The next big Dollar input will be when Fed Chair Jerome Powell delivers his semi-annual monetary policy testimony to the Senate - which judging from the latest FOMC meeting should be pretty hawkish and means that any Dollar downside today is likely to be limited,” said ING analysts.

Elsewhere, the Australian Dollar moved up 0.3% on signals of further policy tightening from central bank governor Philip Lowe. The Dollar fell 0.2% to 0.9651 Swiss Francs, the Reuters report adds, whilst the Pound rose 0.4% to $1.2294 before the inflation figures to be published on Wednesday.