Bias: The GBP/HKD is currently bullish-to-range-bound, as it sits just above the 90-day average and is in the upper half of the 3-month range.
Key drivers:
- Rate gap: The Bank of England's cautious approach to rate cuts contrasts with the low rates in Hong Kong, resulting in a widening interest rate differential.
- Risk/commodities: The recent stability in oil prices has supported the GBP against risk-sensitive currencies while leaving the HKD under pressure from market volatility.
- Global trade dynamics: Ongoing geopolitical tensions and shifting trade policies are impacting UK's export activity and overall economic outlook, causing fluctuations in GBP demand.
Range: The GBP/HKD is likely to drift within its recent 3-month range, potentially testing the upper limits but lacking decisive momentum.
What could change it:
- Upside risk: A surprising economic positive from the UK could bolster the GBP.
- Downside risk: Further interventions by the HKMA to stabilize the HKD could exert pressure on the GBP/HKD pair.