The CAD/HKD exchange rate is currently bullish-to-range-bound, as it stands above the 90-day average and within the upper half of the 3-month range.
Key drivers:
- Rate gap: The Bank of Canada's recent interest rate cut to support growth contrasts with the low-interest environment in Hong Kong, maintaining pressure on the HKD.
- Risk/commodities: Oil prices are trending above average, benefitting the CAD, as higher oil prices bolster Canadian revenues.
- Macro factor: The increase in Canadian unemployment last month could influence the CAD, raising concerns about future economic performance.
Range: The CAD/HKD is expected to test the upper extremes of its recent range, especially if oil prices stay strong.
What could change it:
- Upside risk: Stronger-than-expected Canadian economic data could boost the CAD further.
- Downside risk: A significant drop in oil prices or worsening Canadian economic forecasts could weaken the CAD against the HKD.