GBP/CNY Outlook: Slightly positive, but likely to move sideways as the rate is above its recent average, supported by cautious optimism about UK manufacturing data.
Key drivers:
- Rate gap: The Bank of England is expected to maintain rates for now, while the People's Bank of China has implemented measures to lower rates, widening the gap between the two currencies.
- Risk/commodities: Oil prices have been fluctuating, which can impact both the UK economy and the Chinese yuan indirectly through trade and manufacturing activities.
- A macro factor: Market participants are concerned about potential interest rate cuts by the Bank of England, which could weigh on the pound.
Range: GBP/CNY is likely to drift within its recent 3-month range as it maintains its current position.
What could change it:
- Upside risk: A surprise decision from the Bank of England to signal tighter monetary policy could strengthen GBP.
- Downside risk: Continued disappointing UK economic data might pressure GBP, leading to a potential decline.