GBP/XAF Outlook:
Slightly weaker, but likely to move sideways, as the rate is below its recent average and near recent lows.
Key drivers:
• Rate gap: The Bank of England's dovish stance contrasts with the Bank of Central African States tightening its policy, which has historically strengthened the XAF.
• Risk/commodities: The ongoing contraction in the oil sector and expectations of slower economic growth in the CEMAC region may support stability for the XAF while dampening its competitive edge against the GBP.
• One macro factor: Mixed economic indicators from the UK, including rising inflation and strong retail sales, yet limited movement in GBP may keep pressure on the currency.
Range:
Expect the GBP/XAF to remain stable within its recent trading range, with no significant moves likely.
What could change it:
• Upside risk: A surprise surge in UK economic data could boost GBP against XAF.
• Downside risk: Continued political uncertainty in the UK leading to further declines in GBP value could weaken it against XAF.