GBP/AED Outlook: Slightly positive, but likely to move sideways, as the rate is above its recent average but lacks a clear driving force for significant movement.
Key drivers:
- Rate gap: The Bank of England is adopting a cautious approach towards rate reductions, while the Central Bank of the UAE maintains its alignment with the US Federal Reserve's policies.
- Risk/commodities: Despite expected fluctuations in oil prices, the UAE Dirham remains stable due to its peg to the US Dollar, which supports its value.
- One macro factor: With forecasts of slower UK GDP growth, UK exports may be impacted by ongoing global trade tensions, particularly from potential US tariffs, limiting the pound's performance.
Range: GBP/AED is likely to hold its position within a narrow range, showing stability near recent highs.
What could change it:
- Upside risk: A significant positive shift in UK economic indicators, such as rapid wage growth or increased consumer spending.
- Downside risk: Heightened geopolitical tensions that could lead to a drop in investor confidence in the pound.
