USD/HKD Outlook: Bullish, as the rate is near recent highs and supported by ongoing tariff concerns impacting the US dollar.
Key drivers:
- Rate gap: The Federal Reserve is expected to cut interest rates while the Hong Kong Monetary Authority is maintaining its peg, creating a widening differential that supports the USD.
- Risk/commodities: Increased volatility in oil prices, linked to global tensions, tends to bolster the USD as a safe haven, negatively impacting the HKD.
- Geopolitical tensions: Recent developments, including military actions and tariff threats, are contributing to uncertainty surrounding the USD, which could increase demand for secure currencies.
Range: The USD/HKD is likely to drift within its recent range as markets react to upcoming economic data and geopolitical events.
What could change it:
- Upside risk: A sudden escalation in trade disputes could further weaken the HKD, driving additional demand for USD.
- Downside risk: A stronger-than-expected US labor report might lead to a shift in market focus toward the HKD as expectations for rate cuts from the Federal Reserve increase.