The current market bias for GBP to CNY is range-bound.
Key drivers include:
- The interest rate differential is tightening, as the Bank of England (BoE) is expected to reduce rates cautiously while the People's Bank of China is maintaining a stable monetary stance.
- Sentiment on the yuan is supported by anticipated economic growth around 5% in China, aided by government stimulus measures and improving trade conditions.
- UK inflation is projected to decline, affecting the BoE's ability to keep rates higher, which may pressure the pound.
The near-term trading range for GBP to CNY is expected to remain stable, as recent trading data shows it has fluctuated within 3.5% from its average level.
An upside risk could come from stronger-than-expected retail sales in the UK, boosting the pound. Conversely, a downside risk includes further indications of slowing UK economic growth, which may lead to increased pressure on the GBP against the CNY.