GBP/AED Outlook:
The GBP/AED rate is slightly weaker, but likely to move sideways. Currently trading near its 3-month average and at 14-day lows, there are no clear drivers pushing it decisively in either direction.
Key drivers:
• Rate gap: The Bank of England holds rates steady while the UAE Central Bank recently reduced its base rate, causing a relative shift.
• Risk/commodities: Low oil prices have contributed to cautious sentiment, affecting the sterling's performance against the dirham.
• One macro factor: Political uncertainties in the UK are heightening concerns, particularly surrounding the upcoming byelection, which could influence the pound's stability.
Range:
Expect GBP/AED to hold within its recent range, potentially drifting as market conditions evolve.
What could change it:
• Upside risk: A surprise increase in UK retail sales could bolster the pound.
• Downside risk: Intensified speculation around further interest rate cuts from the Bank of England could weaken the GBP further.