The current market bias for the AED to GBP exchange rate is bearish.
Key drivers include:
- The Bank of England is projected to reduce interest rates to 3.25% by mid-2026, creating a negative interest rate differential compared to the UAE's stable rates, which may weaken the GBP.
- The UK’s economic growth is expected to decelerate, projected at 1.4% in 2026, which could negatively affect the GBP.
- The UAE’s GDP is forecasted to grow robustly at around 4.9% in 2025, supporting the AED.
In the near term, the exchange rate is expected to trade within a stable range, continuing its recent patterns just below the three-month average.
An upside risk could emerge from stronger than anticipated economic data from the UAE, boosting the AED. Conversely, deeper-than-expected rate cuts from the Bank of England could pressure the GBP lower, affecting the exchange rate unfavorably.