The U.S. dollar advanced against its major counterparts in the European session on Thursday, as the prospects of faster rate hikes by the U.S. Federal Reserve supported the currency.

Investors are expecting the Fed to raise rates by 50 basis points at each of the next three meetings in an attempt to combat inflation.

Fed Chairman Jerome Powell confirmed last week that a 50 basis point hike would be on the table at the meeting in May. The Fed meeting is due next week.

U.S. treasury yields rose, with the benchmark 10-year yield touching 2.88 percent.

Strong earnings reports lifted European markets.

Data from the Commerce Department showed that U.S. economic activity unexpectedly contracted in the first quarter of 2022.

The report said real gross domestic product declined by 1.4 percent in the first quarter after spiking by 6.9 percent in the fourth quarter of 2021. The pullback surprised economists, who had expected GDP to increase by 1.1 percent.

Data from the Labor Department showed that first-time claims for U.S. unemployment benefits edged slightly lower in the week ended April 23.

The report showed initial jobless claims dipped to 180,000, a decrease of 5,000 from the previous week's revised level of 185,000.

The greenback has been trading higher against its key counterparts in the Asian session.

The greenback firmed to a 20-year high of 131.01 against the yen and more than a 5-year high of 1.0471 against the euro, from Wednesday's closing values of 128.42 and 1.0555, respectively. The greenback is seen challenging resistance around 132.00 against the yen and 1.01 against the euro.

The greenback touched near 2-year highs of 1.2421 against the pound and 0.9759 against the franc, up from yesterday's closing values of 1.2540 and 0.9690, respectively. The greenback may find resistance around 1.215 against the pound and 0.99 against the franc.

The greenback jumped to near a 2-year high of 0.6454 against the kiwi and near a 2-month high of 1.2880 against the loonie, compared to 0.6542 and 1.2814, respectively hit at Wednesday's close. Next key resistance for the dollar is seen around 0.63 against the kiwi and 1.30 against the loonie.

The greenback resumed its early rally against the aussie and reached 0.7061, which was its highest level since February 4. The greenback was worth 0.7125 per aussie at Wednesday's New York session close. On the upside, 0.69 is likely seen as its next resistance level.

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