HKD/CNY Outlook:
Bearish, as the rate is below its recent average and near recent lows, pressured by central bank interventions and economic conditions.
Key drivers:
• Rate gap: The Hong Kong Monetary Authority's interventions have kept the HKD under pressure, while the People's Bank of China is actively managing the CNY's value.
• Risk/commodities: Recent government stimulus in China has driven a gradual recovery in the economy, which supports the CNY.
• One macro factor: The PBOC's reduction of interest rates to stimulate the economy signals ongoing support for the yuan's value.
Range:
The HKD/CNY is likely to drift within its recent range as both currencies face conflicting pressures.
What could change it:
• Upside risk: A shift in the HKMA's approach to currency support could strengthen the HKD against the CNY.
• Downside risk: Further aggressive rate cuts by the PBOC could enhance CNY strength, pushing HKD lower.
