EUR/USD Fails to Gain Momentum Amid Eurozone Growth and Fed Uncertainty

Chris Turner at ING notes that despite solid Eurozone data and lower oil prices, the EUR/USD pair has not seen significant gains against the US Dollar. He attributes this to possible US activity in EUR/JPY as a short-term drag.

The Federal Reserve's (Fed) decision in September is expected to be a major driver of the trend, with US data this week also playing a crucial role. Turner notes that the Fed's decision will determine whether EUR/USD tests 1.1615/20 resistance or falls back below 1.15.

ING argues that US authorities were likely checking rates in and possibly selling EUR/JPY on Friday, but doubts this news will have a lasting impact on the euro. The US Treasury has around $13bn of euro-denominated FX reserves to sell, which is relatively small compared to Tokyo's activity in FX markets.

Turner suspects that the US Treasury might have sold EUR/JPY to avoid explaining to the US public why it was selling the dollar. He emphasizes that this decision would be driven by political considerations rather than economic ones.