USD/HKD fluctuates after relatively weaker GDP data for Hong Kong in the third quarter.

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The USD/HKD pair has changed little as traders react to Hong Kong Q3 data.
The Hong Kong economy grew by 2.8% in the third quarter.
Investors are also paying attention to the US-Hong Kong relations in the Biden

The USD/HKD exchange rate has hardly changed today as traders digest the latest third quarter GDP data from Hong Kong. It is trading at 7.7537, slightly above last month’s low of 7.7500.

USD/HKD reacts to Hong Kong GDP data
Hong Kong GDP data

Hong Kong has achieved significant success in dealing with the Covid pandemic. The small administrative region with more than 7.5 million inhabitants has only 5,400 cases and 103 deaths. This success is mainly due to the government’s emphasis on rapid testing and contact tracing.

However, the city’s economy is experiencing problems due to the decline of foreigners in the city, which has affected the retail and hospitality sectors. In fact, most hotels and luxury retailers in the city continue to struggle. These sectors also had to struggle because of the massive protests in the city last year.

In a report released today, government data shows that Hong Kong’s economy grew by 2.8% in the third quarter after contracting by 0.1% in the second quarter. On an annualized basis, the economy contracted by 3.5%, an improvement from the 9.0% decline in the second quarter.

According to the city’s statistical office, private consumer spending fell by 8.2% year-on-year in the third quarter. Government consumer spending also increased by 7%, while fixed capital formation fell by 11%. Total exports of goods and services also recovered slightly.

Relations between the USA and Hong Kong

The USD/HKD is also reacting to the recent parliamentary elections in the United States. Analysts hope that a Joe Biden president will be generally positive for the relationship between the US, China and Hong Kong. This is because relations between the three deteriorated during the Trump administration.

For example, the government introduced tariffs on most goods from China to reduce the trade deficit. Although Hong Kong was not originally affected, the trade conflict had an overall impact.

And recently, the US has taken several decisions to punish Hong Kong after China passed a new national security law.

In the meantime, the USD/HKD is also following new developments in the vaccine sector. This week Pfizer and BioNTech announced that their vaccine is 90% effective. In the same week Russia also announced that its Sputnik vaccine is 92% efficient. A vaccine would be a good thing for Hong Kong’s economy as it would bring tourists and business travelers to the city.

Technical outlook USD/HKD
USD/HKD technical table

As I have already written, the technical analysis of the USD/HKD pair is relatively difficult. This is because the Hong Kong dollar is usually pegged to the US dollar and the city’s “central bank” regularly sets the price. Thus, on the daily chart we can see that the pair is at the lower end of the HKD peg. It has moved only slightly upward in the past few days, crossing the 25-day moving average. At this time, the outlook for the pair is neutral, but support and resistance levels are 7.50 and 7.60. Read our report on the best brokers for forex spread betting.

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