Tuesday's Market Minute: Range-Bound Currencies Set For A Breakout?

Currency futures are center stage this month, and the British Pound is in the spotlight today. The sterling has lagged this year, currently down over 6.5% from its yearly highs in mid-March. The prospect of a No-Deal Brexit on October 31 now looms ever larger, as Britain’s Conservative Party chose hardliner Boris Johnson to take the reins as prime minister. The Euro is the next currency to watch, with the European Central Bank’s announcement on Thursday. Sluggish economic conditions overseas have many questioning whether President Mario Draghi and company will take a more dovish posture in their forward guidance.

Closer to home, the U.S. dollar has shown some strength recently, now up about 1.75% since its recent lows in June. But the near-term fate of the greenback (and the broader market) likely depends on rate action from the Federal Reserve on July 30 & 31. The CME FedWatch Tool currently predicts a 100% chance of a cut this month despite generally positive economic data, so it may seem the only variable is whether rates drop 25 or 50 basis points. Until then, traders will likely have to accept range-bound markets in the currencies until traders get more information about these potentially major catalysts.

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