Bias: Bullish-to-range-bound, as the AED is above the 90-day average and in the upper half of the 3-month range.
Key drivers:
- Rate gap: The Central Bank of the UAE's alignment with the US Federal Reserve suggests continued stability for the AED, while the Bank of the Philippine Islands is expected to ease monetary policy amidst economic challenges.
- Risk/commodities: Given the stability of oil prices, which supports the UAE economy, the AED remains resilient compared to the peso.
- One macro factor: Declining growth prospects for the Philippines, coupled with suggestions of potential monetary easing, are likely to weigh on the peso's strength.
Range: The AED/PHP pair is expected to drift within its recent range, maintaining stability while testing upper levels.
What could change it:
- Upside risk: A surge in foreign investment in UAE-based assets could further strengthen the AED.
- Downside risk: Heightened concerns about the Philippine economy, particularly the impact of infrastructure budget cuts, could increase pressure on the peso.