USD/HKD Outlook: The outlook is likely to increase as the USD trades above its recent average, near 90-day highs, supported by solid economic signals.
Key drivers:
- Rate gap: The Federal Reserve's pause on rate cuts is keeping the USD attractive compared to the HKD amidst ongoing intervention by the Hong Kong Monetary Authority to maintain its currency peg.
- Risk/commodities: The recent volatility in oil prices could influence the USD if it affects U.S. inflation and spending, indirectly boosting the dollar’s appeal.
- One macro factor: Strengthening factory activity in the U.S. could bolster demand for the USD, as suggested by upcoming ISM manufacturing PMI data.
Range: The USD/HKD is expected to hold within its recent 3-month range, potentially testing the upper levels given the current bullish momentum.
What could change it:
- Upside risk: A positive surprise in U.S. economic data could further elevate the USD.
- Downside risk: Escalating geopolitical tensions may prompt investors to seek safer assets, adversely impacting the USD.