EUR/HKD Outlook: Bullish, as the rate is above its recent average and trading near recent highs, fueled by strong eurozone economic prospects.
Key drivers:
• Rate gap: The European Central Bank is maintaining a neutral policy stance, while the Hong Kong Monetary Authority has allowed rate differentials to widen, putting pressure on the HKD.
• Risk/commodities: The oil price is trading above its average, creating inflationary pressures, which can strengthen the euro as it affects European energy costs.
• One macro factor: Germany’s consumer confidence index is closely watched; any improvement could further boost the euro.
Range: EUR/HKD is likely to hold near its current position or drift slightly higher within its recent range.
What could change it:
• Upside risk: A significant improvement in economic data from the eurozone could enhance the euro’s appeal.
• Downside risk: Any escalation in geopolitical tensions would likely pressure the euro and lead to market volatility.
