Euro Stagnates as Federal Reserve Decision Looms

Chris Turner from ING argues that the Euro should be performing better against the US Dollar despite solid data from the Eurozone and lower oil prices. He notes that Japanese dollar selling has also contributed to a favorable environment for the Euro.

However, Turner suggests that possible US activity in EUR/JPY may have had a short-term impact on the currency pair's performance. Specifically, he mentions that news of US authorities checking rates and possibly selling EUR/JPY on Friday may have weighed on the Euro.

ING disputes the significance of this development, pointing out that the US Treasury's $13 billion in euro-denominated FX reserves is a relatively small amount compared to Japan's activity in FX markets. Turner also speculates that the US may have sold EUR/JPY to avoid explaining dollar sales to the public.

The bigger driver of the EUR/USD trend will be the Federal Reserve's September decision, which remains unresolved. This week's US data will also play a crucial role in determining whether the Euro breaks through resistance at 1.1615/20 or falls back below 1.15.