HKD/CNY Outlook:
Bearish, as the rate is below its recent average and close to its lows.
Key drivers:
• Rate gap: The Hong Kong Dollar's pegged status against the US dollar puts pressure on the HKD, affecting its competitiveness against the Chinese yuan.
• Risk/commodities: With the price of Brent Crude oil currently below average, demand for the HKD may continue to weaken, impacting trade flows.
• One macro factor: The People's Bank of China's (PBOC) recent interest rate cuts aim to stimulate the economy, which could support the CNY and pressurize the HKD further.
Range:
The HKD/CNY is likely to drift lower within its recent range as external pressures persist.
What could change it:
• Upside risk: A stronger-than-expected recovery in the Hong Kong economy could increase demand for the HKD.
• Downside risk: An unexpected escalation in US-China trade tensions may lead to further CNY strength against the HKD.