Bias: The AUD/HKD pair is bullish-to-range-bound, as it currently sits above the 90-day average and within the upper half of its 3-month range.
Key drivers:
• Rate gap: The Reserve Bank of Australia's potential rate hikes indicate a stronger interest rate outlook than the low rates maintained by the Hong Kong Monetary Authority.
• Risk/commodities: With oil prices remaining volatile, demand fluctuations can heavily impact AUD, given Australia's export reliance on commodities, including iron ore.
• One macro factor: China’s ongoing economic recovery remains uneven, dampening demand for Australian exports, which could limit AUD's potential strength.
Range: The pair is likely to drift within the recent range, with potential tests of extremes possible under evolving market conditions.
What could change it:
• Upside risk: A stronger-than-expected rebound in China's economy could boost demand for Australian exports, supporting the AUD.
• Downside risk: Continued evidence of disinflation in China could weigh on the AUD, leading to a potential pullback.