EUR/USD declines towards 1.0600 as US retail sales improve USD appeal

• EUR/USD is expected to see further declines as the appeal of the US Dollar strengthens.
• The Fed's Mary Daly said there is no urgency for the Fed to cut interest rates.
• The ECB is expected to start reducing interest rates from the June meeting.

The EUR/USD pair continues to fall below the immediate support of 1.0620 in the American session on Monday. The pair weakens as strong spending by US households at retail stores in March has improved the attractiveness of the US Dollar.

The US Census Bureau reported that monthly retail sales grew strongly by 0.7% versus expectations of 0.3%. In February, retail sales data rose 0.9%, revised up from 0.6%. Retail sales data is one of the leading indicators of consumer spending, which accounts for more than two-thirds of the U.S. economy. Higher household spending indicates a firmer inflation outlook.

Rising retail sales would allow those responsible for the Federal Reserve (Fed) to maintain a restrictive monetary policy for longer.

Fed policymakers have been reiterating the need to keep interest rates higher until they are convinced that inflation will return to the required rate of 2%. San Francisco Fed President Mary Daly declared Friday that there is no urgency to start reducing interest rates. Daly added that there is still work to be done to ensure that inflation is on track to return to the desired rate of 2%.

Early in Monday's session in New York, Federal Reserve Chairman John Williams sounded more optimistic about potential growth but believes rate cuts will begin by the end of the year.

In the Eurozone, Peter Kazimir, head of monetary policy at the European Central Bank (ECB), sees a rate cut possible from the June meeting if inflation continues to fall. Regarding the longer-term outlook, Kazmir said the ECB is not committed to any policy path beyond June, saying they must maintain flexibility.

Last week, the ECB kept the interest rate on its main refinancing operations at 4.5%, as expected. At a monetary policy conference, ECB President Christine Lagarde said that if a new assessment increases policymakers' confidence that inflation is heading back toward target, then “it would be appropriate” to cut interest rates. Reuters reported.