The dollar is off the highs as markets attempt a recovery after a risk-off day on Thursday. Comments from Fed Chair Powell and his colleagues caused uncertainty. US retail sales and consumer sentiment are eyed. The yen is down after the BOJ and the kiwi benefits from strong inflation figures. Cryptocurrencies continue their slow decline.

Federal Reserve Chair Jerome Powell said that inflation is uncomfortably high but still seen as transitory, causing unease in stock markets. He added that the bank is unsure how high the labor force participation rate can rise.  His colleague James Bullard supported tapering bond buys while another, Charles Evans, forecasts a rate hike only in 2024, perhaps late 2023.

The dollar benefited from the risk-off mood on Thursday and has edged lower on Friday as the mood improves. US Retail Sales are projected to have dropped by 0.4% in June, a second consecutive drop, while the Control Group is forecast to have risen last month. Consumption is central to America’s economy. 

Later in the day, the University of Michigan’s preliminary Consumer Sentiment Index for July is expected to edge higher. Investors will be watching the inflation expectations components. 

The yen stands out with falls after the Bank of Japan left its interest rate unchanged but downgraded its growth forecast to 3.8% from 4% for fiscal 2021/22. USD/JPY is moving toward 110.

NZD/USD is benefiting from a 1.3% QoQ inflation increase in New Zealand, nearly double the expectations. The news comes after the Reserve Bank of New Zealand announced the end of its bond-buying scheme. Rate hike expectations have risen.

Bank of England member Michael Saunders sent sterling higher by suggesting it is time to end bond buying and tighten as inflation rises. Some speculate the BOE could raise rates before the Fed. GBP/USD is trading above 1.38 as investors await Britain’s reopening on Monday coming despite another leap in COVID-19 cases.

EUR/USD is hovering around 1.18, off the lows. Final eurozone inflation figures are set to confirm the 1.9% annual increase in June. Concerns about rising covid cases remain prevalent. 

Top cryptocurrencies have been extending their gradual decline, with Bitcoin slipping below $32,000 and Ethereum nearing $1,900. Dogecoin is also feeling the heat.