EU session review: Dollar rises on Bernanke's comments

Data released:
07:45     Italy     PMI services (March)    53.3    52.0    53.1
07:50     France     PMI services (March)    60.4    60.7    59.7
07:55     Germany     PMI services (March) seasonally adjusted    60.1    60.1    58.6
08:00     EU(17)     PMI services (March)    57.2    56.9    56.8
08:30     UK     CIPS services index (March)    57.1    52.3    56.2
09:00     EU(17)     Retail sales (February) adjusted    -0.1%    0.0%    0.2 (0.4)%
09:00     EU(17)     Retail sales (February) adjusted Y/Y     0.1%    0.6%    0.7%

The dollar advanced against the euro after Federal Reserve Chairman Ben S. Bernanke said inflation must be watched “extremely closely,” spurring bets that interest rates may be raised sooner than previously expected.
“Bernanke’s comments suggest that the market might be underestimating the degree to which the Fed could tighten monetary policy and that sets the scene for a narrow dollar rally,” said Lee Hardman, a currency strategist at Bank of Tokyo-Mitsubishi UFJ Ltd.. “Europe’s debt crisis is far from being resolved and that’s another reason that could push euro-dollar lower.”
Bernanke’s comments echoed his March 1 statement to lawmakers that Fed officials were “prepared to respond as necessary” to inflationary pressures. The policy-setting Federal Open Market Committee, led by Bernanke, said March 15 it “will pay close attention to the evolution of inflation and inflation expectations.”
“The dollar is doing well on the back of rate hike expectations,” said Chris Walker, a currency strategist at UBS AG.
The euro also weakened after Moody’s Investors Service lowered Portugal’s long-term credit rating by one step to Baa1.
The pound strengthened as a report showed services industries expanded more than forecast in March. U.K. services gauge PMI rose to 57.1 from 52.6 in February, higher than the median economist forecast of 52.6.

EUR/USD extended Asian tendency and fell to session low on $1.4157. Later rate set stable around $1.4157/70.

GBP/USD rallied from $1.6090 tо $1.6250 following a strong PMI report. Later rate retreated to $1.6230.

USD/JPY holds within the Y84.16/42 range.

The U.S. Institute for Supply Management’s index of non- manufacturing businesses probably reached 59.5 in March from 59.7 the previous month, which was the highest since August 2005, according to a survey of economists. Report is due to come at 14:00 GMT..