Bias: bullish-to-range-bound, as the pair sits above its 90-day average and in the upper half of the three-month range.
Key drivers:
- Rate gap: The US Fed’s policy rate remains materially higher than HKD liquidity, helping USD maintain an edge against HKD as the HKMA defends the peg (the HKD is fixed within a band against the USD).
- Macro factor: Markets expect Fed easing toward a neutral stance in 2026, which could influence USD funding costs and carry trades (funding strategies using low-cost borrowing to finance trades) that affect HKD flows.
Range: Expect drift toward the upper end of the three-month band, with potential tests of the recent high, especially during regional liquidity shifts and quarter-end flows in early trading.
What could change it:
- Upside risk: stronger US payrolls and clearer Fed easing guidance could push USD higher against HKD.
- Downside risk: softer US data and a faster-than-expected policy shift toward rate cuts could ease USD and support HKD.
