GBP/AED Outlook: The outlook for GBP/AED is likely to increase as the rate trades above its recent average and is near recent highs, supported by the ongoing tension around US tariffs which could impact the UK economy.
Key drivers:
• Rate gap: The Bank of England has indicated a cautious approach to monetary policy, while the UAE's central bank maintains a stable rate aligned with the US Federal Reserve.
• Risk/commodities: Oil prices remain relatively stable, providing support for the AED given its importance to the UAE's economy.
• One macro factor: The UK's projected GDP growth slow down may weigh on investor confidence, especially in light of potential new tariffs from the US.
Range: GBP/AED is likely to hold its current position within the recent 3-month range.
What could change it:
• Upside risk: A significant reduction in US tariffs could boost GBP strength in the market.
• Downside risk: A worsening economic outlook for the UK could lead to renewed pressure on the GBP.
