USD/XAF Outlook:
Bearish, as the rate is below its 90-day average and near recent lows, facing pressure from geopolitical and economic factors.
Key drivers:
• Rate gap: The Federal Reserve has paused rate cuts while the Bank of Central African States has tightened its monetary policy, creating a shift that favors the XAF.
• Risk/commodities: The decline in oil prices has impacted both currencies; however, the XAF is more insulated due to its rate hike aimed at stabilizing the currency.
• One macro factor: Despite the overall economic slowdown in the CEMAC zone, the BEAC reassured against potential devaluation, enhancing confidence in the XAF.
Range:
Expect the USD/XAF to drift within its recent 3-month range, given the recent downward pressure.
What could change it:
• Upside risk: A stronger-than-expected report on U.S. jobs could boost the USD significantly.
• Downside risk: Continued geopolitical tensions leading to further declines in the USD could push the XAF higher.
