USD/HKD wavers after relatively weaker Hong Kong Q3 GDP data
- The USD/HKD pair is little changed as traders react to Hong Kong Q3 data.
- The Hong Kong economy expanded by 2.8% in the third quarter.
- Investors are also watching out for US-Hong Kong relationship in Biden administration
The USD/HKD is little changed today as traders digest the latest third-quarter GDP data from Hong Kong. It is trading at 7.7537, which is slightly higher than last month’s low of 7.7500.
Hong Kong GDP data
Hong Kong has had significant success in dealing with the Covid pandemic. The small administrative region of more than 7.5 million people has recorded just 5,400 cases and 103 deaths. This success is mostly because of the government’s emphasis on rapid testing and contact tracing.
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However, the city’s economy has struggled because of the decline in foreigners to the city that has affected the retail and hospitality industries. Indeed, most hotels and luxury retailers in the city have continued to struggle. These sectors also struggled because of last year’s massive protests in the city.
In a report today, data from the government showed that Hong Kong’s economy expanded by 2.8% in the third quarter after contracting by 0.1% in Q2. The economy contracted by 3.5% on an annualised basis, which was an improvement from the second quarter’s decrease of 9.0%.
According to the city’s statistics bureau, private consumption expenditure fell by 8.2% year-on-year in the third quarter. Government consumption expenditure also increased by 7% while fixed capital formation fell by 11%. Total goods and services exports also made a slight recovery.
US-Hong Kong relations
The USD/HKD is also reacting to the recent general election in the United States. Analysts hope that a Joe Biden president will overall be positive for the US-China-Hong Kong relations. That is because relations between the three deteriorated during the Trump administration.
For example, the administration imposed tariffs on most goods from China in a bid to narrow the trade deficit. While Hong Kong was not originally affected, the overall trade conflict had an impact.
And recently, the US has made several decisions to punish Hong Kong after China passed a new national security law.
Meanwhile, the USD/HKD is also eying the new developments on vaccine. This week, Pfizer and BioNTech announced that their vaccine was 90% efficient. In the same week, Russia also said that its Sputnik vaccine was 92% efficient. A vaccine would be a good thing for Hong Kong’s economy because it would boost tourists and business travellers to the city.
USD/HKD technical outlook
As I have written before, technical analysis of the USD/HKD pair is relatively tough. That is because the Hong Kong dollar is usually pegged to the US dollar and the city’s “central bank” regularly fixes the price. So, on the daily chart, we see that the pair has been in the lower side of the HKD peg. It has only moved slightly upwards and crossed the 25-day moving average in the past few days. At this stage, the outlook for the pair is neutral but the support and resistance will be at 7.50 and 7.60, respectively. Read our review of the best forex spread betting brokers.