Anna 
During Friday’s European session, the EUR/USD pair extended its decline to near a five-month low around 1.0660. The major currency pair faced significant downward pressure on strong speculation that the European Central Bank (ECB) would initiate interest rate cuts starting from its June meeting.
The ECB opted to maintain its key borrowing rates unchanged at 4.5% on Thursday, aiming to sustain downward pressure on consumer price inflation. In its monetary policy statement, the ECB highlighted that restrictive financial conditions and previously implemented interest rate hikes were dampening overall demand and exerting downward pressure on inflation.
Moreover, the ECB emphasized its commitment to data-dependency in determining the duration of time interest rates should remain restrictive. The central bank refrained from committing to a specific rate trajectory.
Speculation regarding the ECB’s potential shift to rate cuts gained momentum following remarks from ECB President Christine Lagarde. Lagarde indicated that if a fresh assessment bolstered policymakers’ confidence in inflation returning to target levels, then a reduction in interest rates “would be appropriate,” as reported by Reuters.
Meanwhile, market sentiment remained subdued as traders scaled back on significant bets anticipating the Federal Reserve (Fed) to commence interest rate reductions from its June meeting. S&P 500 futures registered losses during the European session. Additionally, 10-year US Treasury yields experienced a slight decline after reaching a more than four-month high near 4.60%. The US Dollar Index (DXY), which measures the USD against six major currencies, surged to a near five-month high around 106.00.
Looking ahead, investors will turn their attention to the monthly Retail Sales data scheduled for release on Monday. Retail Sales data serves as a leading indicator of consumer spending. Stronger Retail Sales figures imply robust consumer spending, contributing to a persistent inflation outlook.
