AED/CAD Outlook: Slightly weaker, but likely to move sideways, as the rate is below its recent average and near recent lows.
Key drivers:
• Rate gap: The stable monetary policy of the Central Bank of the UAE supports the AED while the Bank of Canada has lowered rates to balance growth and inflation, which pressures the CAD.
• Risk/commodities: Oil prices are currently above-average, which generally supports the CAD; however, recent price softening may limit its strength.
• One macro factor: The uncertainty around Canada’s trade relationship with the U.S. is dampening the CAD's performance due to recent export declines.
Range: The AED/CAD pair is likely to drift within its recent 3-month range as external pressures are balanced by stable influence from the UAE.
What could change it:
• Upside risk: A significant rebound in Canadian oil prices could strengthen the CAD.
• Downside risk: Further deterioration in the trade relationship with the U.S. may push the CAD down further.