GBP/HKD Outlook:
The GBP/HKD exchange rate is slightly positive, supported by its current position above the 90-day average and near the upper end of its 3-month range. However, rising political uncertainty in the UK is adding some pressure.
Key drivers:
- Rate gap: The Bank of England's dovish stance suggests potential interest rate cuts, while the HKMA has actively intervened to stabilize the HKD, maintaining its strength.
- Risk/commodities: Recent fluctuations in oil prices may impact UK inflation, influencing the GBP performance, as lower oil prices tend to exert downward pressure on inflation.
- One macro factor: Ongoing political issues in the UK, including leadership challenges for Keir Starmer, could deepen uncertainties affecting the GBP.
Range:
Expect the GBP/HKD rate to drift within its recent range, holding above the average but facing potential fluctuations due to political developments.
What could change it:
- Upside risk: A significant improvement in UK economic indicators or a stable political outlook could strengthen the GBP.
- Downside risk: Continued political instability or further dovish shifts from the Bank of England could push the GBP lower.
