GBP/HKD Outlook: The outlook for GBP/HKD is likely to increase as the rate is significantly above its 90-day average and near recent highs, supported by strong UK trade concerns.
Key drivers:
• Rate gap: The Bank of England's cautious approach to potential future rate cuts contrasts with the weak conditions around the Hong Kong Dollar, indicating a favorable position for the Pound.
• Risk/commodities: Rising global trade tensions, especially with the US tariffs impacting the UK, could weigh on economic growth, providing support for the Pound despite concerns.
• One macro factor: The expected slowdown in the UK's GDP growth, coupled with stagnant household incomes and reduced public spending, adds to the uncertainty surrounding the Pound.
Range: Movement for GBP/HKD is likely to hold within the recent 3-month range as market participants digest economic signals while remaining cautious.
What could change it:
• Upside risk: A sudden decrease in US tariffs could boost the Pound further.
• Downside risk: Renewed geopolitical tensions that amplify demand for safe-haven assets may pressure the GBP.