Forex Today: Dollar returns by the hand of tapering, upbeat US data

What you need to know on Friday, June 4:

The greenback soared against most of its major rivals, reaching fresh weekly and even monthly highs across the FX board. Late on Wednesday, the US Federal Reserve announced it would start unwinding one of its programs set to support the economy throughout the pandemic. "Portfolio sales will be gradual and orderly and will aim to minimize the potential for any adverse impact on market functioning," the Fed said.

The news sent stocks lower and the dollar higher, with the latter’s rally fueled by upbeat US data. The country published the ADP survey on private jobs creation, which posted a whopping 978K in May, largely surpassing the 650K expected.  Initial Jobless Claims for the week ended May 28 printed at  385K, better than the 395K expected and the lowest reading since the pandemic started. Finally, the ISM Services PMI jumped to 64 in May, beating expectations.

The US economy is recovering at a faster pace, helped by the immunization campaign and better weather. The country is set to publish the May Nonfarm Payrolls report on Friday, and substantial job gains could further fuel the American currency.

The EUR/USD pair flirts with 1.21, while GBP/USD trades around 1.4100. The USD/JPY pair soared to a fresh 2-month high of 110.31, while commodity-linked currencies also gave up to the dollar’s strength.

Gold plummeted and finished the day at $ 1.871 a troy ounce, while crude oil prices held on to gains. WTI settled at $ 68.70 a barrel.

European equities closed in the red, leading to sharp losses in Wall Street ahead of the opening. However, upbeat US data helped US indexes to trim most of their intraday losses.

US government bond yields ticked higher and settled near the upper end of their weekly range.

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