Bias: Range-bound, with GBP/CNY below its 90-day average and in the middle of the three-month range.
Key drivers:
- Rate gap: BoE remains cautious on rate cuts; the path suggests gradual easing while the PBOC keeps policy supportive to stabilise the yuan, keeping UK rate moves slower than China’s easing, narrowing the gap.
- PBOC liquidity measures: Offshore yuan bills are being issued to absorb liquidity and steady the yuan, limiting downside pressure on CNY, and part of a broader effort to keep financial conditions orderly amid shifting global liquidity.
- Macro factor: Major banks project yuan strength later in 2026 as policy stays accommodative and the gap between policy paths narrows, underpinning yuan support and balancing the pair.
Range: Likely to hover within the recent three-month range, with a drift toward the lower end if risk appetite softens.
What could change it:
- Upside risk: stronger UK data or a slower pace of BoE easing could lift GBP.
