AED/EUR Outlook:
Bearish, with the rate currently below its recent average and near recent lows, due to pressures from Eurozone economic concerns.
Key drivers:
• Rate gap: The UAE Dirham's stability is supported by its peg to the US Dollar, helping it remain resilient compared to the Euro, which faces uncertainty from lower inflation data.
• Risk/commodities: With oil prices significantly above their recent average, the UAE benefits from increased oil revenue, aiding the Dirham's performance against the Euro.
• One macro factor: Eurozone inflation falling to 1.7% raises concerns about potential European Central Bank rate cuts, which could weaken the Euro further.
Range:
The AED/EUR rate is likely to drift within its recent range, as it remains below average without strong upward momentum.
What could change it:
• Upside risk: A surprise ECB decision to maintain or raise interest rates could bolster Euro strength and impact the exchange rate.
• Downside risk: Continued weakness in Eurozone economic indicators could exacerbate the Euro's decline against the Dirham.
