Euro Held Back by Fed Uncertainty

The Euro has not performed as well as it should have against the US Dollar, according to Chris Turner at ING. Despite solid Eurozone data and lower oil prices, EUR/USD has been held back by uncertainty surrounding the Federal Reserve's (Fed) September decision.

Turner notes that the fact that US authorities were checking rates in, and possibly selling, EUR/JPY on Friday may have had a short-term impact. However, he believes this news will not have any lasting effect on the euro.

The US Treasury has around $13bn of euro-denominated FX reserves to sell ($1.2bn in deposits, $11.7bn in securities), which is relatively insignificant compared to Tokyo's activity in FX markets and global flows.

The bigger driver of the EUR/USD trend will be the Fed's September decision, with US data this week having a significant say in whether the currency pair tests 1.1615/20 resistance or falls back below 1.15.