The current market bias for GBP to CNY is bearish.
Key drivers include:
- The Bank of England is expected to lower interest rates to support the economy, while the People's Bank of China is taking a cautious approach to monetary policy, keeping rates stable.
- UK fiscal concerns and anticipated budget cuts may apply further downward pressure on the pound.
- China’s economy shows signs of growth, supported by government stimulus amid easing trade tensions, which could bolster the yuan.
In the near term, the GBP/CNY exchange rate is expected to trade within a stable range.
Upside risks for the GBP include potential surprises in UK economic data that may bolster confidence, while a downside risk is a sharper-than-expected slowdown in UK economic growth, which could lead to more aggressive rate cuts by the BoE.