HKD/GBP Outlook: Likely to decrease, as the rate is below its recent average and influenced by key factors.
Key drivers:
• Rate gap: The Hong Kong Monetary Authority has maintained a stable currency peg to the US dollar, resulting in lower interest rates for HKD compared to the GBP.
• Risk/commodities: The sustained low HIBOR rates in Hong Kong have led to increased carry trades, which have weakened the HKD against the GBP.
• One macro factor: UK inflation remains concerning, with recent data suggesting the Bank of England may keep interest rates steady, providing support for a stronger GBP.
Range: The HKD/GBP exchange rate is likely to drift within its recent range, showing no significant signs of recovery.
What could change it:
• Upside risk: A positive shift in Hong Kong economic indicators or a surge in equity market inflows could strengthen the HKD.
• Downside risk: A noticeable increase in political uncertainty in the UK could lead to volatility, impacting the GBP negatively.