Bias: Bullish-to-range-bound, as the current level is above the 90-day average and in the upper half of the 3-month range.
Key drivers:
- Rate gap: The Bank of England is expected to proceed cautiously with rate cuts, while the UAE’s Central Bank keeps its rate aligned with the US Federal Reserve, supporting the Dirham's strength.
- Risk/commodities: Oil prices are volatile lately, which can impact economic sentiment and influence the GBP, especially since the UK's economy is sensitive to energy costs.
- One macro factor: UK GDP growth is projected to slow, which could keep the Pound under pressure in the coming months.
Range: Expect the GBP/AED to hold steady within the recent 3-month range, with potential minor fluctuations.
What could change it:
- Upside risk: A surprise increase in UK economic data could lift the Pound.
- Downside risk: Continued geopolitical tensions could lead to a flight to safety, favoring the Dirham over the Pound.