GBP/HKD Outlook: Likely to increase, as the rate is above its recent average and near recent highs, supported by ongoing trade dynamics.
Key drivers:
- Rate gap: The Bank of England is expected to implement cautious rate cuts, while the Hong Kong Monetary Authority maintains a weak peg strategy, causing rates to diverge.
- Risk/commodities: Subdued export activity due to new US tariffs may lead to weaker demand for GBP, while capital inflows from Hong Kong's IPO market could strengthen the HKD.
- One macro factor: The UK's projected GDP growth slowdown amid tariff concerns adds downward pressure on the GBP.
Range: GBP/HKD is likely to drift within its recent range as external factors continue to influence investor decisions.
What could change it:
- Upside risk: A shift towards a more supportive UK fiscal policy could strengthen the GBP.
- Downside risk: Heightened global trade tensions and additional US tariffs could further weaken the GBP.