Bias: Bearish-to-range-bound, as the AED/AUD is below the 90-day average and trading in the lower half of the 3-month range.
Key drivers:
• Rate gap: The central bank of the UAE maintains a steady rate pegged to the US Dollar, while the Reserve Bank of Australia is discussing potential interest rate hikes in 2026, creating a divergence in monetary policy outlooks.
• Risk/commodities: Weaker-than-expected Chinese inflation is raising concerns about subdued demand for Australian exports, particularly commodities critical to the economy, which negatively impacts the AUD's strength.
• One macro factor: Expectations surrounding the upcoming Consumer Price Index data release in Australia are contributing to uncertainty regarding the AUD's near-term direction.
Range: The AED/AUD pair is likely to hold within its recent range, with no strong momentum in either direction.
What could change it:
• Upside risk: Hawkish signals or robust domestic economic data from Australia could strengthen the AUD.
• Downside risk: Continued softness in Chinese economic data could further weigh on the AUD’s performance.
