AED/EUR Outlook:
The AED/EUR rate is slightly weaker and likely to move sideways, currently just below its 90-day average and recent lows. This lack of clear drivers keeps the rate within a stable range.
Key drivers:
• Rate gap: The UAE Central Bank's recent interest rate cut contrasts with the European Central Bank's focus on inflation management, placing the AED at a disadvantage relative to the EUR.
• Risk/commodities: Oil prices are rising significantly, which typically supports the AED, but Europe's energy concerns remain a drag on the euro.
• One macro factor: Recent Eurozone consumer confidence figures were below expectations, reflecting ongoing economic uncertainty that could weigh on the euro.
Range:
Expect the AED/EUR rate to hold steady as it trades within its recent 3-month range without significant deviation.
What could change it:
• Upside risk: A sharp increase in oil prices may enhance the AED's appeal and strengthen its position against the Euro.
• Downside risk: Continued weak economic data from the Eurozone could push the euro lower, further straining the AED's performance.
