SGD/AED Outlook: Slightly positive, but likely to move sideways. The exchange rate is above its recent average but lacks a clear driver.
Key drivers:
• Rate gap: The Monetary Authority of Singapore has maintained its monetary policy, while the UAE's Central Bank is focused on enhancing financial stability, leaving the rate gap generally steady.
• Risk/commodities: Oil prices remain relatively stable, which supports both currency valuations but does not create strong movements in either direction.
• One macro factor: The MAS has raised inflation forecasts for Singapore, reflecting expectations of mild inflationary pressures that could eventually benefit the SGD.
Range: The SGD/AED is likely to hold within its recent range, with potential to drift slightly.
What could change it:
• Upside risk: A significant drop in inflation rates in the UAE could strengthen the AED, supporting upward movement in SGD/AED.
• Downside risk: Escalating global trade tensions affecting Singapore’s exports could negatively impact the SGD, pushing it lower against the AED.
