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LONDON (Thomson Financial via COMTEX) -- The dollar retained positive momentum from hawkish comments overnight by Federal Reserve chairman Ben Bernanke, who stressed that inflation is a prime concern for the central bank.

In a Fed conference in Massachusetts, Bernanke said the looser monetary and fiscal policies in the U.S. will help the economy from its current slowdown, and that "the risk that the economy has entered a substantial downturn appears to have diminished over the past month or so."

He said the Fed "will strongly resist an erosion of longer-term inflation expectations," suggesting interest rates may actually be raised later this year.

"Inflation warnings from Bernanke have jacked up market interest rate expectations for the U.S., with three hikes now priced in before year end," said Daragh Maher at Calyon.

However, Maher noted that this renewed hawkishness is not confined to the Fed at the moment, with both the European Central Bank and the Bank of England signalling recently that inflation is their main concern as well.

"The obvious global catalyst has been the renewed rise in commodity prices... but the more pertinent wider driver may be a growing sense that global central bankers are going to adopt an ECB-type approach to combating inflation, with activity a potential casualty," said Maher.

With the ECB continuing to sound their alarm over inflation, the euro and dollar are expected to remain locked in a range as policymakers on either side of the Atlantic take turns to boost their currencies.

In the UK, the pound was lower despite upbeat economic data this morning, as investors took profits on the strong gains made yesterday on the back of high producer price data.

PPI inflation accelerated to record levels in May, confirming the BoE will not be cutting interest rates any time soon. That pushed the pound to surge to highs from which it is still easing.

Retail sales data this morning from the British Retail Consortium and housing data from the Royal Chartered Institute of Surveyors were both better than expected - with both retail sales and home prices rising in May despite analyst expectations for decreases.

Investors will look to comments from BoE governor Mervyn King at 1100 GMT today for more direction on the central bank's interpretation of recent economic news.