GBP/CNY Outlook: Slightly weaker, but likely to move sideways, as the rate is below its recent average and near recent lows without clear drivers.
Key drivers:
- Rate gap: The Bank of England's cautious approach to potential rate cuts contrasts with the People's Bank of China's commitment to stabilizing the yuan, affecting investor confidence.
- Geopolitical risks: Ongoing trade tensions, particularly involving the US and UK, are creating uncertainty, impacting exports and the overall GBP outlook.
- Economic growth projections: The UK's GDP growth is expected to slow, influenced by stagnant household incomes and possible recession risks tied to US tariffs.
Range: The GBP/CNY pair is likely to drift within its current 3-month range, reflecting a lack of significant movement in either direction.
What could change it:
- Upside risk: A stronger-than-expected UK jobs report could boost the pound.
- Downside risk: Further escalation in US trade tariffs could increase stress on the pound, prompting a decline.