AED/EUR Outlook:
The AED/EUR exchange rate is currently below its 90-day average and near recent lows. It is likely to decrease as current factors weigh on the dirham’s stability.
Key drivers:
• Rate gap: The UAE Central Bank's recent interest rate cut aligns with the US Federal Reserve, limiting upward pressure on the dirham.
• Risk/commodities: High oil prices, trading at 90-day highs, may support the dollar but could fail to provide significant strength for the dirham against the Euro.
• One macro factor: Upcoming CPI data from Germany may indicate easing inflation, which could restrain the euro’s appreciation.
Range:
Expect the AED/EUR to hold within its recent 3-month range, with little movement as it tests the lower boundary.
What could change it:
• Upside risk: Stronger remittance flows could boost demand for AED.
• Downside risk: A sharp increase in eurozone inflation could strengthen the euro further against the dirham.