GBP/HKD Outlook:
Slightly positive, but likely to move sideways as the rate is above its recent average and lacks a clear driver.
Key drivers:
• Rate gap: The Bank of England's cautious policy stance contrasts with the Hong Kong Monetary Authority's interventions to maintain the HKD's peg, potentially favoring GBP.
• Risk/commodities: Recent oil price stability has limited pressure on the GBP, maintaining some support for its strength against the HKD.
• One macro factor: The mixed UK economic data, including solid retail sales but rising inflation, complicates the outlook for the GBP.
Range:
Expect the GBP/HKD to hold within the recent 3-month range, given its stable trading environment.
What could change it:
• Upside risk: Stronger UK economic data could prompt a shift in the BoE’s outlook, supporting GBP.
• Downside risk: Increased political uncertainty or dovish comments from the BoE could weaken the pound further.