GBP/AED Outlook:
Slightly positive, but likely to move sideways as the rate is above its recent average, yet lacks a clear driver.
Key drivers:
• Rate gap: The Bank of England's recent dovish stance contrasts with the UAE's stable currency peg to the US Dollar, which affects the relative strength of GBP against AED.
• Risk/commodities: Recent fluctuations in oil prices have caused uncertainty, which may impact the UAE's foreign reserves and indirectly affect the Dirham's stability.
• One macro factor: Political uncertainty in the UK continues to weigh on the Pound, as ongoing leadership questions create hesitance among GBP investors.
Range:
Expect GBP/AED to move within its recent 3-month range, as the market stays cautious.
What could change it:
• Upside risk: A significant rise in oil prices could boost sentiment towards the Dirham, leading to a stronger exchange rate.
• Downside risk: Renewed political developments in the UK that intensify uncertainty could apply further pressure on the Pound.
