Bias: The bias is bullish-to-range-bound as the SGD is currently above the 90-day average and in the upper half of the 3-month range.
Key drivers:
- Rate gap: The Monetary Authority of Singapore has adopted a more accommodative monetary stance, while the Central Bank of the UAE has aligned its policies with the US Federal Reserve, creating a favorable rate differential for the SGD.
- Risk/commodities: Oil prices have exhibited volatility, which may impact the AED indirectly given the UAE's economy's connection to oil revenues.
- Economic indicators: Singapore's GDP growth is moderating to near-trend levels, reflecting its stability amidst global trade tensions.
Range: The SGD/AED exchange rate is likely to test the upper extremes of its recent 3-month range.
What could change it:
- Upside risk: A sustained increase in oil prices could bolster the AED, challenging the SGD’s strength.
- Downside risk: Any unexpected deterioration in Singapore's economic outlook could negatively impact the SGD's current position.