HKD/GBP Outlook: Slightly weaker, but likely to move sideways, as the rate is below its recent average and near recent lows, showing limited upward momentum.
Key drivers:
• Rate gap: The Hong Kong Monetary Authority's recent interventions have kept HKD rates near zero, while the Bank of England has indicated a cautious stance on potential rate cuts, widening the interest rate gap.
• Risk/commodities: With the ongoing U.S. tariff threats impacting UK exports, the pound remains under pressure, which could create volatility in the currency pairs.
• One macro factor: Projections show UK GDP growth slowing amid stagnant incomes, reinforcing a cautious outlook for the GBP.
Range: The HKD/GBP exchange rate is likely to drift within its recent range, as it test its near-term lows but lacks strong drivers for recovery.
What could change it:
• Upside risk: A significant reduction in U.S. tariffs that positively affects UK's trade balance could strengthen the GBP.
• Downside risk: Further declines in UK economic indicators, particularly wage growth, may lead to a weaker GBP and increased pressure on the HKD.
