GBP/CNY Outlook: Slightly weaker, but likely to move sideways, as the rate is below its recent average and near recent lows with limited immediate drivers.
Key drivers:
• Rate gap: The Bank of England is expected to reduce interest rates, while the People's Bank of China is actively stimulating the economy, widening the gap in monetary policy.
• Risk/commodities: Oil prices have been fluctuating, which impacts economic growth and consumer spending in both the UK and China, creating uncertainty for the currencies involved.
• One macro factor: The UK's inflation is projected to trend down towards 2% by mid-2026, raising concerns about economic growth which could further weigh on the pound.
Range: The GBP/CNY is likely to hold around its current levels within its recent stable range amid a lack of strong directional indicators.
What could change it:
• Upside risk: A stronger-than-expected UK economic recovery could buoy the pound.
• Downside risk: Continued monetary easing from the PBOC might lead to a firmer yuan against the pound.
