The recent performance of the British Pound (GBP) against the UAE Dirham (AED) reflects predominant bearish sentiment, primarily driven by concerns about slowing economic growth in the UK. With the latest GDP figures indicating a mere 0.1% growth in the third quarter, analysts predict a potential interest rate cut by the Bank of England (BoE) as early as December. This has led to increased pressure on the pound, pushing it to multi-month lows.
Investors are particularly anxious ahead of the upcoming UK budget on November 26, which is expected to reveal possible tax hikes and fiscal shortfalls. Economists suggest that the Office for Budget Responsibility may revise productivity forecasts downward, which could worsen the financial outlook and further weaken GBP. Consequently, the pound's current trading level of 4.8313 is 1.7% lower than its three-month average of 4.9156, indicating that GBP/AED has operated within a stable range of 4.7817 to 5.0120.
On the other hand, the UAE Dirham (AED) has shown some resilience. Recent developments, such as a currency swap agreement with Turkey and an interest rate cut by the UAE central bank, have aided in maintaining investor confidence in the local economy. Notably, the AED has strengthened against various Asian currencies, enhancing remittance values for expatriates in the UAE.
Analysts predict that unless there is a significant turnaround in UK economic data or monetary policy from the BoE, the GBP may continue to struggle against the more stable AED. The market appears cautious, weighing the potential for further declines in GBP value as fiscal and political uncertainties persist in the UK. Businesses and individuals engaged in international transactions should remain vigilant and consider hedging strategies or timely currency exchanges to mitigate financial exposure.
