Bias: The current performance of AED/CAD is bullish-to-range-bound, as it is near the 90-day average and in the upper half of the 3-month range.
Key drivers:
- Rate gap: The Central Bank of the UAE maintains a stable monetary policy closely aligned with that of the U.S. Federal Reserve, while the Bank of Canada recently reduced its interest rate, creating a favorable situation for the AED.
- Risk/commodities: Recent increases in oil prices are beneficial for the CAD, yet ongoing volatility in oil markets could impact the Canadian currency's stability moving forward.
- Canadian economic data: A surprising rise in unemployment in Canada raises concerns about economic growth, likely limiting support for the CAD.
Range: The AED/CAD pair is expected to hold within its recent 3-month range, with potential for slight drift in either direction depending on market developments.
What could change it:
- Upside risk: A sustained rally in oil prices could strengthen the CAD significantly.
- Downside risk: Further increases in Canadian unemployment or economic weakness could weaken the CAD against the AED.
