GBP/XOF Outlook:
Slightly weaker, but likely to move sideways as the rate is near its recent average and lacks a clear driver.
Key drivers:
• Rate gap: The Bank of England's dovish stance contrasts with the Bank of Central African States' (BEAC) firm commitment to maintain the CFA franc's stability, affecting GBP's strength against the XOF.
• Risk/commodities: Oil prices have shown volatility but remain slightly below average, which can impact economic conditions in both regions, particularly for the XOF tied to commodities.
• One macro factor: Mixed economic indicators from the UK, including an uptick in retail sales, create uncertainty for the GBP's prospects.
Range:
Expect the GBP/XOF to test recent extremes but remain within its stable 3-month range of just over 2%.
What could change it:
• Upside risk: A stronger-than-expected UK GDP growth report could improve GBP's position.
• Downside risk: Continued political uncertainty or news of further negative developments regarding the CFA franc could weaken XOF further.