Bias: GBP/AED is bullish-to-range-bound, as it sits above its 90-day average and in the upper half of the three-month range, reflecting steadier trading.
Key drivers:
- Rate gap: BoE is expected to deliver gradual rate cuts in 2026 while UAE policy tracks the Fed, widening the policy gap.
- Macro factor: UK inflation is forecast to ease toward the BoE target by late 2026, reducing pressure on rate differentials and supporting a steadier GBP under unfolding monetary policy.
- Global risk appetite: firmer appetite tends to lift the pound against the dirham, supporting GBP in a range-bound backdrop and helping it hold its ground when USD moves are uneven.
Range: GBP/AED is likely to hover near the upper half of the three-month range, with a gentle drift toward the high end, barring a surprise UK data print or a sharp turn in USD.
What could change it:
- Upside risk: stronger-than-forecast UK data or a softer dollar could push GBP higher.
- Downside risk: a faster BoE rate-cut path or renewed dollar strength could pull GBP/AED lower.
