CAD/AED Outlook:
The CAD/AED rate is slightly weaker but likely to move sideways, as it is just above its recent average and near the recent lows. Current market conditions do not show a clear driver for a significant change in momentum.
Key drivers:
- Rate gap: The Bank of Canada maintains a higher overnight policy rate compared to the UAE Central Bank, supporting the CAD despite its recent declines.
- Risk/commodities: Oil prices are currently above average, which typically strengthens the CAD, although recent choppy movements have limited its impact.
- Macro factor: Canada added a significant number of jobs in December, reinforcing the strength of its labor market, which could support the CAD if sustained.
Range:
The CAD/AED rate is likely to hold within its recent 3-month range, not testing extreme levels significantly in the near term.
What could change it:
- Upside risk: A substantial rise in oil prices due to geopolitical tensions could boost the CAD's value.
- Downside risk: Any increase in trade tensions with the U.S. might negatively impact the CAD's performance.
