USD/HKD Outlook: Bullish, as the rate is above its recent average and near recent highs, supported by ongoing US economic concerns.
Key drivers:
• Rate gap: The US Federal Reserve is expected to cut interest rates further, which puts pressure on the USD against the Hong Kong Dollar (HKD), potentially widening the gap between the two currencies.
• Risk/commodities: Volatility in global markets due to geopolitical tensions has contributed to a weakening USD, as investors seek safety and reduce exposure to US assets.
• One macro factor: Recent increases in US jobless claims indicate economic weakness, further escalating concerns about the USD’s strength.
Range: The USD/HKD is likely to hold within its recent 3-month range, as it tests the upper end following recent highs.
What could change it:
• Upside risk: A shift in geopolitical dynamics that stabilizes the USD could strengthen it against the HKD.
• Downside risk: Additional economic data showing declining US employment could push the USD lower, negatively affecting the exchange rate with HKD.
