Forex Today: ECB policy announcements, US data to dominate the action

Here is what you need to know on Thursday, June 6:

Following Wednesday's choppy action in foreign exchange markets, investors gear up for key events that could ramp up the volatility. The European Central bank (ECB) will announce monetary policy decisions on Thursday and the US economic calendar will feature weekly Initial Jobless Claims and Unit Labor Costs data for the first quarter ahead of Friday's May jobs report. 

The upbeat ISM Services PMI data for May, which came in at 53.8 to beat the market expectation of 50.8, from the US helped the US Dollar (USD) outperform its rivals in the American session. With Wall Street's main indexes gathering bullish momentum, however, the currency struggled to preserve its strength. Early Thursday, the USD Index holds steady above 104.00 and the benchmark 10-year US Treasury bond yield clings to modest recovery gains near 4.3%. Meanwhile, US stock index futures trade virtually unchanged on the day.

The ECB is forecast to lower key rates by 25 basis points following the June policy meeting. Following the release of the policy statement, ECB President Christine Lagarde will speak on policy outlook and respond to questions from the press. Ahead of the ECB event, Eurostat will publish Retail Sales data for April. Earlier in the day, Germany's Destatis reported that Factory Orders declined by 0.2% on a monthly basis in April following the 0.8% contraction recorded in March. Ahead of the key ECB event, EUR/USD fluctuates in a narrow channel above 1.0850.

GBP/USD registered small gains on Wednesday and continued to push higher toward 1.2800 during the Asian trading hours on Thursday.

Following a two-day decline, USD/JPY rose nearly 0.8% on Wednesday. In the European morning, the pair stays in a consolidation phase at around 156.00. The Bank of Japan (BoJ) Governor Kazuo Ueda said on Thursday that inflation expectations are gradually rising but yet to reach 2%, adding that the Japanese central bank will move cautiously on interest rates to avoid any big mistakes. 

Japanese Yen appreciates due to rising expectations of a Fed rate cut.

The data from Australia showed on Thursday that Exports declined 2.5% on a monthly basis in May while Imports decreased 7.2%. After rising toward 0.6700 in the Asian session, AUD/USD lost its bullish momentum and retreated below 0.6660 by the European morning.

Australian Dollar rebounds on improved risk appetite, US NFP looms.

Gold benefited from falling US Treasury bond yields and gained more than 1% on Wednesday. XAU/USD continued to stretch higher early Thursday and was last seen trading at its highest level in two weeks near $2,370.