The Emirati Dirham is experiencing a quiet week by way of United Arab Emirates data releases, leaving a lot of AED fluctuations to global developments. The AED has been pegged to the US Dollar since November 2007 and therefore any developments in the US can be extremely influential for the Emirati Dirham exchange rate.
Recently US economic data has been less favourable, with a notable downturn in areas like consumer spending, employment and confidence. Weaker US data has allowed the AED currency to weaken as it tracks the US Dollar’s movements. However, this week could see some major US Dollar movement on account of some highly influential US ecostats. Friday will be the main event when it comes to AED/USD exchange rate movement with the US Consumer Price Index (CPI) due for publication. The core measure of inflation is forecast to soften from 1.8% to 1.7% in April on the year, while the non-core gauge is expected to dip further into deflation territory, from -0.1% to -0.2%.
If the US Federal Reserve opts to keep interest rates on hold in the near future, the US Dollar is expected to weaken significantly. Therefore, many industry experts are awaiting Wednesday’s Fed meeting minutes from the April policy meeting. The release of the minutes is forecast to cause some interesting market movement as investors attempt to forecast whether the US Federal Reserve will be in a position to hike interest rates this year. Therefore any hawkish tones from policymakers could cause a US Dollar rally. If the Federal Reserve were to hike interest rates in the Autumn as some economists have suggested, house prices in the UAE would have to downwardly adjust to become affordable to mortgage payers. Furthermore, there are concerns that the oil price crash – which began mid-way through last year – could be causing a major slowdown, which will see job losses throughout the UAE. If a string of unfavourable UAE data emerges, it’s highly likely that the Emirati Dirham exchange rate could remain lower for some time.
Additionally, a worsening in conflict in the Middle East is threatening to pressure the AED exchange rate lower at any moment. The Pound Sterling to Emirati Dirham exchange rate is trending in the region of 5.7628. The US Dollar to Emirati Dirham exchange rate is trading at 3.6730.