Forex Today: US Dollar selloff continues as focus shifts to ECB policy decisions

Here is what you need to know on Thursday, May 4:

The US Dollar stays under persistent selling pressure following the US Federal Reserve's (Fed) rate decision and Chairman Jerome Powell's comments on the policy outlook. The European Central Bank (ECB) will announce its policy decisions later in the day and the US economic docket will feature the weekly Initial Jobless Claims report alongside March Trade Balance and Unit Labor Costs data for the first quarter.

The Fed raised its policy rate by 25 basis points (bps) to the range of 5-5.25% as expected after its May policy meeting. In the policy statement, the Fed stopped using the language saying that "some additional policy firming may be appropriate in order to attain a stance of monetary policy that is sufficiently restrictive to return inflation to 2% over time." The dovish change in the Fed's tone triggered a sharp decline in the US Treasury bond yields and caused the US Dollar Index (DXY) to extend its daily slide late Wednesday.

Although FOMC Chairman Jerome Powell refrained from confirming a pause in the tightening cycle in June and said that they were not forecasting a rate cut this year, these comments did little to nothing to change the market perception. After having lost 0.7% on Wednesday, the DXY continues to edge lower early Thursday and stays within a touching distance of 101.00.

The ECB is forecast to raise its key rates by 25 bps later in the day. Investors will want to see whether the ECB will confirm one more rate hike at the next meeting. Ahead of this important event, EUR/USD continues to stretch higher toward 1.1100 in the European morning.

ECB Preview: 25bps is not the same as 50bps.

GBP/USD gained 100 pips on Wednesday and erased Monday's and Tuesday's losses. The pair clings to small daily gains early Thursday and trades slightly below 1.2600.

In the early Asian session, Gold price reached an all-time high of $2,080 before retreating below $2,050 by the European morning. The benchmark 10-year US Treasury bond yield stages a modest rebound after having lost nearly 7% in the last two days, limiting XAU/USD's upside for the time being.

USD/JPY fell nearly 200 pips on Wednesday and retraced the majority of the bullish rally witnessed toward the end of the previous week. The pair stays relatively quiet early Thursday and fluctuate near 134.50.

Bitcoin continues to edge higher after having registered modest gains following the Fed event late Wednesday. At the time of press, BTC/USD was trading near $29,200. Ethereum gained nearly 2% for the second straight day on Wednesday and seems to have stabilized slightly above $1,900 early Thursday.