The current market bias for the AED/CAD exchange rate is bearish.
Key drivers influencing the rate include:
• Interest rate differentials remain stable, with Canada's rates maintaining at 2.25% as of December; this stability is crucial as it influences investment flows.
• The weaker performance of oil prices, currently at 7-day lows, has added pressure on the CAD, impacting its value as a commodity-linked currency.
• Canada's recent strong jobs report shows economic resilience, supporting potential CAD strength over time.
In the near term, the AED/CAD rate is expected to trade in a slightly downward range, while its current level rests near recent highs.
An upside risk to this forecast could arise if Canada’s retail sales data shows significant improvement, boosting the CAD. Conversely, a downside risk may stem from any further declines in oil prices, which could weaken the CAD further against the AED.