2025-08-20 07:04

Key takeaways The impact of the S&P ratings upgrade, expected GST tax cuts, and geopolitical developments affecting tariff rates, are intrinsically interlinked, in our view. The fiscal projections backing the ratings upgrade will depend on how GST tax cuts are funded, which in turn will depend on India’s growth prospects amid elevated tariffs. Even as we await clarity on tariffs and taxes, it will be worth monitoring developments on trade and domestic reforms, which seem to be back in focus. We’ve seen it all in the last 72 hours. An S&P upgrade after 18 long years of waiting. A promise of Goods and Services Tax (GST) rate cuts by Diwali, bringing cheer to consumers. And important geopolitical meetings between Presidents Trump and Putin, and then Trump and President Zelenskiy, which could have implications for the 25% secondary tariff levied on India for buying Russian oil. Where does this leave Indian markets and the economy? While analysing them all, we realise that, in terms of the impact, the three developments are closely interlinked. S&P upgrade: What impressed the agency? After revising India’s outlook to positive last year, S&P Global Ratings upgraded India’s sovereign credit rating to BBB from BBB-on 14 August. This move may not just boost sentiment, but also help lower the risk premia and borrowing costs in the economy. The long wait ended, thanks to a much-improved economic outlook according to S&P. It highlighted India’s fiscal discipline since the pandemic, with the combined fiscal deficit falling to 7.3% of GDP in FY26 from 13.4% at the pandemic’s peak. The quality ofexpenditure has also improved. Meanwhile, inflation has been contained despite exogenous shocks, and the current account deficit remains low despite the rise in public capex. However, that was in the past. Looking ahead, it is clear that S&P has based its big move on two key projections. That GDP growth will average 6.8% over the next three years. In addition, the consolidated fiscal deficit will fall further from 7.3% now to 6.6% by FY29, marking a 0.7ppt consolidation in three years. These, together, will help lower public debt (from above to below 80% of GDP). While there is no immediate threat of the ratings upgrade being reversed if the projections do not materialise, for the sustainability of current ratings and future upgrades, it is worth asking what it will take for S&P’s projections to be correct. Here we pass on the baton to the GST tax rate cuts, for that could affect S&Ps desire for 0.7ppt fiscal consolidation over three years. GST tax cuts: Who foots the bill? On 15 August, Prime Minister Modi announced an overhaul of the GST tax regime. Slashing rates across a range of products, by moving the majority of the items in the 12% and 28% slabs to the 5% and 18% slabs, respectively. In addition, collapsing a system of four key GST rates (5%, 12%, 18%, and 28%) into two main rates (5% and 18%) alongside a special rate (of 40% for about seven sin goods and luxury vehicles). The compensation cess is also likely to be subsumed by the 40% special rate. This promises to bring two benefits. Immediate tax cuts could spur demand across products –food, beverages, consumer durables, autos, hotels, cement, building materials, etc. And over time, efficiency gains of moving to a simpler and more predictable tax regime with fewer rates, could raise India’s potential GDP growth over time (though some would say that there is more that can be done on GST reforms, for instance, bringing in petroleum and electricity in the GST fold). So far so good. However, things begin to get complicated when we ask who will foot the bill on tax cuts. Best to pause here to clarify that many of the details on the new GST rates are not yet known and we are developing a possible scenario based on the information we have. We estimate that as some products are moved to lower tax buckets (from the 12% to the 5% bin, and from the 28% to the 18% bin, though a minority may be pushed up from the 12% to 18% or from 28% to 40% too), the cost to the exchequer will be around USD16bn (INR1430bn, 0.4% of GDP). In the GST spirit, this could be equally split between the central and state governments. The centre has other revenue sources to count on, but states do not have as many options. They may not agree to the revenue hit. Their complaint could be that they already follow the FRBM Act whereby they must keep the fiscal deficit below 3% of GDP. Now following the GST rules and cutting tax rates could be a difficult task, unless they cut other important expenditure like capex. If the central government then comes up with a compensation plan to handhold states for a few years, the funds would have to be made available. If these funds are generated by a GST tax hike in say, some luxury goods or suchlike, that would go against the efficiency principles of having fewer GST rates. This is important because the GDP growth boost from efficiency gains could then be compromised. And the expectation of high tax revenue growth on the back of stronger GDP growth prospects may not materialise. One can point out that losing some efficiency and growth gains temporarily may be a price worth paying for a long-term reform. But that, we think, will be easier to digest if the overall outlook for growth over the short term is buoyant. Is that the case? Tariff talk: Where will it end? The 25% + 25% tariff rates imposed by the US authorities on India’s exports (starting 27 August as of now), have dimmed some of the growth prospects. To recap, c20% of India’s overall exports go to the US, valued at 2.2% of GDP. Thankfully a-third of these exports remain exempt from these tariffs. Yet, we calculate that a 25% tariff could lower growth directly by 0.3ppt over a year, and with a 50% tariff, the growth drag could rise to 0.7ppt. The second round and indirect impact of the elevated tariffs could be meaningful, if not more hurtful. The main non-exempted items that India sells to the US like jewellery, textiles, and food items, are associated with labour-intensive small firms, and disruption there could impact domestic consumption demand. FDI inflows and corporate capex (at about 12% of GDP) could take a hit if India’s exporting potential comes into question. So will these tariff rates stick? While it is hard to forecast here, recent developments are worth tracking. On the oil penalty, much depends on the ongoing peace talks, where, as per a Bloomberg report (18 August), following meetings with the two heads of state, President Trump has calledPresident Putin, urging him to plan a summit with President Zelenskiy within the next two weeks. On the reciprocal tariff, much depends on the ongoing trade talks between India and the US. On 18 August, the Indian government removed import tariffs on cotton imports, a step that could create fresh room for continued negotiations. Clouds lifting, or just shifting? Putting it all together, if tariffs are eventually lowered, the GDP growth drag could soften too. If the growth outlook improves, it may be easier to digest the short-term disruptions associated with funding the GST rate cuts. If fiscal discipline is maintained despite GST rate cuts, the projections on which India achieved a ratings upgrade, will be upheld. We may have to wait a bit longer to ascertain whether clouds are lifting, or just shifting. In the meantime, it would serve India well to have a growth plan, ranging from fiscal support (incentives for exporters), monetary easing (we believe there is some more room available for rate cuts), to structural reforms. On reforms, now is the time to press ahead with trade negotiations (slashing import tariffs on intermediary inputs, fast-tracking the India-EU trade deal, and being open to FDI especially from China), as well as domestic reforms (more ease-of-doing business deregulation across states, implementing the four labour codes, and stepping up disinvestment). While we await details on taxes and tariffs, it will benefit the economy immensely if this is a start of a string of growth-enhancing reforms. https://www.hsbc.com.my/wealth/insights/market-outlook/india-economics/clouds-lifting-or-just-shifting/

2025-08-18 12:02

Key takeaways China’s H2 economic policy aims to speed up capacity reduction and roll out more demand-boosting policies. The new ‘anti-involution’ campaign should help enhance productivity and better balance supply and demand. Emphasis on consumption policies to increase goods and services demand could help unlock more growth potential. China data review (July 2025) Retail sales slowed to 3.7% y-o-y in July amidst a notable pullback in auto sales (-1.5% y-o-y). The China Passenger Car Association recently noted that passenger car and EV sales were up in volume terms by 6.3% and 12% y-o-y in July, down from 10.8% and 33.3% in 1H (Yicai, 8 Aug). Also, the third batch of trade-in subsidies was likely deployed only towards late July (Gov.cn, 26 July). Industrial production decelerated to 5.7% y-o-y in July likely owing to the antiinvolution campaign. However, sectors benefiting from ongoing policy stimulus, such as equipment upgrading and incentives to promote technology and innovation, still led the overall growth, e.g., high-tech manufacturing up 9.3%. Property investment dropped 17% y-o-y in July, the deepest contraction since November 2022. Meanwhile, primary residential home sales also fell 7.1% y-o-y in volume terms. Of note, the latest July Politburo meeting and the Central Urban Work Conference had set the tone that advancing urban renewals and increased urbanisation will be the key focus in the longer term. CPI inflation was flat in y-o-y terms in July, largely owing to falling prices of food and energy. However, core CPI continued to improve, rising 0.8% y-o-y, likely helped by the ongoing fiscal push to boost consumption. On the producer side, PPI inflation remained weak in July, dropping 3.6% y-o-y. It will take more time to see impacts from anti-involution campaign. Exports sustained the growth momentum, rising 7.2% y-o-y in July, given a low base from last year as well as continued trade restructuring and related frontloading to emerging markets regions. Meanwhile, imports grew 4.1% y-o-y, helped by ongoing strength in processing imports, while ordinary imports also returned to positive growth. Structural reforms picking up pace Strong 1H growth (chart 1), reciprocal tariff pauses, technology innovations from DeepSeek to innovative drugs, and recent policy momentum around structural reforms have made markets more optimistic and could lead to more stable H2 growth than originally expected. China is also shifting to high-quality growth, focusing on consumption, urbanisation, technology upgrades, and addressing excess capacity. Policy support to accelerate Politburo sets the tone: Policymakers were clear in July’s Politburo meeting (30 July) that supporting growth is still the primary focus. The economic policy in H2 aims to implement structural measures, with capacity reduction set to speed up and large projects and new urbanisation plans to be rolled out in an effort to boost consumption. A larger fiscal push may also include mega infrastructure projects, such as the recent RMB1.2trn Tibet Dam. “Anti-involution” campaign to accelerate: While the anti-involution push may slow short-term growth due to industry consolidation and layoffs, it should lift productivity and improve the balance between supply and demand in the longer run. Unlike the supply side reforms in 2016, China is aiming for a more market-oriented approach to reduce capacity. A series of laws and regulations, such as the Private Economy Promotion Law, have recently been enacted aiming to level the playing field. If these are properly implemented, they will not only deter and penalise anti-competitive behaviour, but also accelerate national market integration. The campaign should also help to lift prices (chart 2). During the prior round of reforms, PPI reverted to positive growth after about three quarters from the launch of the campaign. This time around, the pace may be somewhat slower given the emphasis on the market-based approach. Boosting domestic demand: Like before, policies aimed at lifting demand will be a key element. The new urbanisation plan will serve as the policy cornerstone, focussing on urban renewal programmes, improved urbanisation rates and the building of city clusters. The plan aims to expand affordable housing too, potentially converting existing stock. These largescale longer-term projects will also receive more focus in the upcoming 15th Five Year Plan. China is also maintaining its strategy to enhance high-quality consumption growth. While subsidies for consumer durable goods have been in place since last year, a significant development is that the central government is now providing direct support for services consumption, such as child and elderly care. As urbanisation advances, new urban residents may be more willing to increase their spending, especially with equal access to public services. Source: CEIC, HSBC Source: CEIC, HSBC Source: LSEG Eikon * Past performance is not an indication of future returns Source: LSEG Eikon. As of 13 August 2025, market close https://www.hsbc.com.my/wealth/insights/market-outlook/china-in-focus/structural-reforms-picking-up-pace/

2025-08-18 12:01

Key takeaways USD weakness has paused lately, but could resume… …depending on the direction of Fed policy and the coming arrival of its new chair. If markets show concerns over Fed independence, the USD could face headwinds. Throughout most of this year, the relationship of the USD with interest rate differentials has been poor, as US policy uncertainty and structural forces are overshadowing such cyclical drivers of the USD. However, there have been nascent signs of the USD’s cyclical drivers taking on greater importance, with the gap between the US Dollar Index (DXY) and its weighted rate differential narrowing (Chart 1). The fact that heightened US trade policy uncertainty no longer coincides with a lower USD gives room for other factors, such as US yields, to increasingly matter. The USD’s weakness has paused lately, in part due to the likelihood of an improvement in the US current account position amid a narrowing trade deficit (Chart 2). Source: Bloomberg, HSBC Source: Bloomberg, HSBC We can back out why USD weakness has paused, but there are other considerations that could soon start testing the currency again. This largely comes down to the Federal Reserve’s (Fed) stance on monetary policy and who could be the next Chair. As the resumption of the Fed’s easing cycle is coming, the cyclical influence for the USD is likely to become more dominant, and gradual Fed easing would still see the USD as a higher yielding currency. There is frequent dialogue about Fed Chair Jerome Powell’s likely departure in May 2026 and who could take over (Reuters, 6 July 2025). Market interpretation of political bias for the Fed can carry different outcomes for the USD. If this is relatively benign in the end and the Fed can cut rates gradually, this supports our central case for the USD to weaken gradually versus many currencies. If, however, markets become concerned about political interference for the Fed, then the USD could behave differently, depending on how cross-asset volatility shifts and long-term US bond yields move. In a problematic situation, the USD would initially weaken versus core currencies like the EUR, JPY, and CHF, but it could be trickier for other currencies that are sensitive to heightened risk aversion, such as the AUD, the NZD, and many other emerging market currencies. https://www.hsbc.com.my/wealth/insights/fx-insights/fx-viewpoint/usd-focus-on-the-fed/

2025-08-18 07:04

Key takeaways Markets cheered July’s lower-than-expected headline US CPI print, with the reading pushing the probability of a September rate cut to 97%, having been as low as 40% a couple of weeks ago. But scratching below the surface reveals some negative developments. Despite a macro landscape in Asia characterised by tariff-driven uncertainty, it’s been a good year so far for the region’s credit markets, with spreads grinding to historical tights across both IG and HY. The release of ChatGPT-5 has intensified the debate over the labour market consequences of AI adoption. Views span from the expectation that we will see productivity gains without employment losses, to concerns about large-scale displacement with limited output benefits. Chart of the week – An expensive dollar One of the biggest surprises of 2025 so far has been how weak the US dollar has been. Coming into the year, most investors were positioned for USD strength amid the belief that Trump’s policy agenda – centred on tax cuts and deregulation – would provide a boost to growth and thus extend US exceptionalism. Instead, as tariffs dominated the White House’s policy agenda, US growth projections for 2025 have been hit hard. But although US stocks have staged an impressive rebound since April, the dollar remains under pressure, resuming a downward trend in August following a mild recovery last month. What does this tell us? It may suggest US stocks may be somewhat shielded from conventional macro and policy effects given the outsized influence of tech and AI. But also that the dollar looks more vulnerable to a cyclical backdrop of Fed cuts and growth convergence with other major developed economies. Structurally, the story around the dollar remains bearish. The currency is expensive. External deficits are likely to remain big, even with tariffs in place. But perhaps more importantly, US institutional integrity may be slowly eroding as policymaking becomes more erratic, legal frameworks are undermined, and the independence of the Fed is under question. This is unlikely to work in the dollar’s favour over the long-term. So, with US exceptionalism most obviously ending with the dollar, hedging USD-denominated assets should be taken seriously when constructing portfolios. And diversification across regions and currencies will be important, especially in emerging markets which benefit the most from USD weakness. Market Spotlight Concentrated risks This month’s strong performance of US mega-cap tech stocks – propelled by a strong Q2 earnings season and renewed AI enthusiasm – has helped push the S&P 500 index to fresh all-time highs. This is reminiscent of the 2023/2024 playbook of US stock performance being driven by a small group of big players. Stock market concentration – for example measured by the share of the top 10 stocks in the S&P 500 – is now at its highest level since the 1930s. This is not necessarily a problem when those stocks are roaring ahead. But it comes with risks. Concentrated portfolios exposed to the fortunes of a few companies are by construction more idiosyncratic and less diversified (even if the big, listed companies straddle across multiple operations). Plus, if concentration is in the most expensive parts of the stock market – as it is today – it implies weaker medium-term investment returns. The value of investments and any income from them can go down as well as up and investors may not get back the amount originally invested. Past performance does not predict future returns. The level of yield is not guaranteed and may rise or fall in the future. For informational purposes only and should not be construed as a recommendation to invest in the specific country, product, strategy, sector, or security. Diversification does not ensure a profit or protect against loss. Any views expressed were held at the time of preparation and are subject to change without notice. Any forecast, projection or target where provided is indicative only and is not guaranteed in any way. Source: HSBC Asset Management, Bloomberg, Macrobond. Data as at 7.30am UK time 18 August 2025. Lens on… All clear on US inflation? Markets cheered July’s lower-than-expected headline US CPI print, with the reading pushing the probability of a September rate cut to 97%, having been as low as 40% a couple of weeks ago. But scratching below the surface reveals some negative developments. Core prices delivered the strongest month-on-month increase since January. And prices of core goods excluding used vehicles are rising at c.2.0% annualised, a clear break from 2024’s trend of gradual decline. Further pass-through across a broad selection of goods seems likely. The Fed’s preferred inflation measure – core PCE – has been stuck in a 2.6-3.0% range since mid-2024 and is now set to rise. While this may be the source of some nerves within the Fed, the good news is a cooling labour market and below-trend growth is helping to cap longer-term inflation expectations and wage growth. This means tariff-induced price rises are less likely to result in enduring inflation, making a couple of rate cuts this year achievable. Arguably, such policy easing would be sensible from a risk management perspective, given the potential for the economy hits its stall speed, triggering a more significant slowdown. Steady fundamentals in Asia credit Despite a macro landscape in Asia characterised by tariff-driven uncertainty, it’s been a good year so far for the region’s credit markets, with spreads grinding to historical tights across both IG and HY. A key driver of this performance has been supportive fundamentals. Credit rating upgrades are outpacing downgrades while default risks remain low and contained within China high-yield property. What’s more, although supply of Asian USD credit is up double digits year-to-date, it remains negative on a net basis. Looking ahead, some analysists think Macau gaming, India commodities and renewables, and selected China and Indonesia industrials could potentially perform in HY. In IG, positive convictions are in bank capital and China tech. More broadly, improved China policy efficacy would have a positive impact on China and Hong Kong names. The good news is reflation appears to have gained importance on the policy agenda, with efforts to address overcapacity, ongoing support to the housing market, and efforts to boost consumption. AI and jobs The release of ChatGPT-5 has intensified the debate over the labour market consequences of AI adoption. Views span from the expectation that we will see productivity gains without employment losses, to concerns about large-scale displacement with limited output benefits. A balanced take implies that while higher productivity can boost economic output, some displacement of workers is inevitable, consistent with past technological shifts. Roles in computing, mathematics, office administration appear most exposed, though workers with highly transferable technical skills (like programmers) may adapt more quickly. Research suggests that highly paid jobs are more exposed but also face fewer barriers to re-employment. Perhaps the greater concern is the potential hollowing out of middle-skilled jobs, as happened in the 2010s following mass adoption of the internet a decade or so earlier. Lower labour costs and higher productivity stemming from AI remain a key feature of upside scenarios for corporate profits and equity market performance over the coming years. But the impact on income and wealth inequality are key uncertainties. Past performance does not predict future returns. The level of yield is not guaranteed and may rise or fall in the future. For informational purposes only and should not be construed as a recommendation to invest in the specific country, product, strategy, sector, or security. Diversification does not ensure a profit or protect against loss. Any views expressed were held at the time of preparation and are subject to change without notice. Index returns assume reinvestment of all distributions and do not reflect fees or expenses. You cannot invest directly in an index. Any forecast, projection or target where provided is indicative only and is not guaranteed in any way. Source: HSBC Asset Management. Macrobond, Bloomberg, BofA Research, Oxford Economics. Data as at 7.30am UK time 18 August 2025. Key Events and Data Releases Last week The week ahead Source: HSBC Asset Management. Data as at 7.30am UK time 18 August 2025. For informational purposes only and should not be construed as a recommendation to invest in the specific country, product, strategy, sector or security. Any views expressed were held at the time of preparation and are subject to change without notice. Any forecast, projection or target where provided is indicative only and is not guaranteed in any way. Market review Risk markets rallied on rising optimism of an early Fed cut amid a strong US Q2 earnings season. While US core CPI ticked higher, led by firmer service sector inflation, goods inflation saw limited signs of tariff-related price rises. The US dollar weakened against major currencies and Treasury yield curve steepened modestly, as investors are factoring in 2-3 Fed rate cuts by year-end. Meanwhile, US and eurozone credit spreads narrowed, with eurozone HY outperforming. In equities, the S&P 500 touched an all-time high and the interest rate sensitive Russell 2000 performed strongly. The Euro Stoxx 50 and the Nikkei 225 also moved higher. In other Asian markets, Indonesian stocks led the regional rallies, hitting a record high. Hong Kong’s Hang Seng also rose, followed by India’s Sensex and Mainland China’s Shanghai Composite. In commodities, gold prices fell, while oil prices moved sideways. https://www.hsbc.com.my/wealth/insights/asset-class-views/investment-weekly/an-expensive-dollar/

2025-08-11 12:01

Key takeaways The Bank of England cuts Bank Rate by 0.25ppts in August. GDP growth lacks direction amid ‘temporary’ pressures… …while inflation is expected to stay above 3.5% throughout the rest of 2025. Source: HSBC The ‘stag’ is weak and lacks direction… UK GDP growth fell for a second consecutive month in May, albeit grew 0.5% on a three-month-on-three-month basis, driven by all three broad sectors. However, the degree of uncertainty in the data is elevated and likely distorted by a range of temporary factors including the front-loading ahead of tariff and stamp duty changes, and retail seasonality adjustments. Nonetheless, underlying economic growth is weak and lacks direction. The PMIs point to little momentum in activity amid continued pressures, notably from higher labour costs that are translating into soft employment demand; the unemployment rate rose to 4.7% in the three-months to May. Meanwhile, GfK consumer confidence in July was lower than a year ago. But all is not lost, many of the factors currently weighing on sentiment are one-off ‘shocks’ the effects of which should subside. Indeed, many indicators are off their March/April lows and forward-looking indicators from both consumers and businesses are more positive. Consumers, while pessimistic about the economic outlook (chart 1), are relatively more certain of their own personal financial situations going forward. Perhaps in part a reflection of wage growth and falling interest rates helping to offset the impact of higher prices. A clear risk lies in the upcoming Autumn Budget, not only in terms of possible policies announced, but also the uncertainty in the lead-up to it. …while the ‘flation’ is strong and sticky The headline rate of CPI inflation rose to 3.6% y-o-y in June from 3.4% in May. Some of that acceleration is of little concern; however, there were signs of price stickiness. Although services inflation was unchanged at 4.7%, core services (chart 2) rose 0.3ppts by our estimates. At its August policy decision, the BoE raised their near-term inflation profile – expected to stay above 3.5% through the remainder of 2025 – and pointed to increased risks of second-round effects via inflation expectations, which remain elevated, and the potential translation into wage growth. Nonetheless, wage growth has moderated, and the BoE cut Bank Rate by 0.25ppts to 4.00% in August. But rates setters are divided, and although that is not new, it points to a lack of improvement in clarity over the outlook for the UK economy. The BoE will need to continue to tread a fine line between managing medium-term price stability and unnecessarily damaging growth. We maintain our view that further moderations in wage growth will help to alleviate inflationary concerns and enable Bank Rate to fall further but the risk is on the side of a slower pace of rate cuts. Source: Macrobond, GfK, HSBC Source: Macrobond, HSBC calculations Source: Bloomberg, HSBC forecasts https://www.hsbc.com.my/wealth/insights/market-outlook/uk-in-focus/stagflation-risks/

2025-08-11 12:01

Key takeaways As expected, the BoE delivered a 25bp cut in August… …but dissents and an upward inflation forecast revision made it feel like a hawkish cut, sending the GBP higher. The Autumn Budget is likely to stand as a major risk for the GBP via fiscal, monetary and political channels. On 7 August, the Bank of England (BoE) cut its policy rate by 25bp to 4.0%, which was the fifth cut in the current easing cycle, as widely expected. The overall tone of the BoE meeting was rather hawkish, given the dissents within the Monetary Policy Committee (MPC) and an upward inflation forecast revision. The rate cut decision was made after a second vote, as the first round was a 4-4-1 deadlock, with four members (Catherine Mann and Huw Pill, as in May, plus Megan Greene and Clare Lombardelli) preferring a hold and one member (Alan Taylor) voting for a 50bp reduction. This showed what a tight call the decision proved to be, and there is a risk of a slowdown in the pace of easing from here. Beyond the bullish knee-jerk reaction to the vote split, the GBP should also look towards the medium-term forecast for inflation. The BoE raised its near-term inflation forecast to 4.0% in September (from 3.7% previously) and its two- and three-year ahead inflation forecasts to 2.0% (from 1.9% previously). This may once again indicate that the BoE will not be in a rush to ease policy again soon. Source: Bloomberg, HSBC Source: Bloomberg, HSBC The GBP spiked higher against both the USD and the EUR, as markets have pared expectations for a November rate cut. The rates market now sees only c35% for this to happen, down from a c80% likelihood ahead of the meeting (Bloomberg, 8 August 2025). Nevertheless, our economists’ base case is that more evidence of disinflation against the backdrop of a weakening labour market will come through, allowing the BoE to reduce its policy rate at a continued 25bp-per-quarter pace, until it gets to 3.0% in Q3 2026. Meanwhile, the UK’s public finance situation has deteriorated since March. As the Autumn Budget (around late October or early November) approaches, the GBP is likely to face downside risks. The possibility of tax hikes could alter the outlook for inflation and unemployment and, thereby, the BoE’s easing path. It could also stir up political uncertainty if the Chancellor’s tax and spending decisions deepen divisions within the Labour party. As such, the GBP is likely to weaken against the EUR, but not by much against the USD, which is still weighed down by US policy uncertainty. https://www.hsbc.com.my/wealth/insights/fx-insights/fx-viewpoint/gbp-the-boes-hawkish-cut/