USD/HKD Outlook: Likely to increase, as the rate is above its recent average and near recent highs, driven by US dollar weakness.
Key drivers:
• Rate gap: The Federal Reserve's expected rate cuts contrast sharply with the near-zero rates in Hong Kong, making USD more attractive.
• Risk/commodities: A recent decline in global oil prices creates uncertainty for the USD, impacting its demand amid geopolitical concerns.
• One macro factor: Fear of a potential US government shutdown is causing unease, further pressuring the US dollar.
Range: The USD/HKD is likely to test the upper end of its recent range as traders respond to USD weakness.
What could change it:
• Upside risk: A stronger than expected US labor market report could bolster the USD.
• Downside risk: A more aggressive response from the HKMA to defend the HKD could push the exchange rate lower.