Bias: Bearish-to-range-bound, as the HKD is below the 90-day average and situated in the lower half of the 3-month range.
Key drivers:
• Rate gap: The interest rate differential remains significant, with HKD rates near zero contrasting sharply with higher rates in the U.S., maintaining downward pressure on the HKD.
• Risk/commodities: Recent declines in oil prices have added to volatility, impacting the economic outlook in Hong Kong and affecting demand for the HKD.
• Chinese growth: Despite a challenging real estate sector, recent government stimulus has led to stronger-than-expected economic growth in China, supporting the CNY against the HKD.
Range: The HKD/CNY pair is likely to drift within its recent range, with potential for either side to hold steady.
What could change it:
• Upside risk: A positive surprise in Hong Kong’s economic performance could increase demand for the HKD.
• Downside risk: Continued global interest rate cuts could further weaken the HKD against a stabilizing CNY.