EUR/XAF Outlook: The EUR/XAF is likely to increase as it trades at 90-day highs and hovers around its 3-month average, supported by stronger Eurozone growth figures.
Key drivers:
- Rate gap: The European Central Bank maintains a cautious stance, while the Bank of Central African States recently tightened monetary policy, creating a widening gap that favors the euro.
- Risk/commodities: Oil prices are currently above their average, benefiting the euro and impacting the XAF due to its relative dependence on commodities.
- Eurozone economic growth: The reported 0.3% expansion in the Eurozone economy may stimulate further euro demand, despite concerns about export competitiveness.
Range: The EUR/XAF is likely to drift within its recent range as it stays near the 3-month average, with limited volatility expected.
What could change it:
- Upside risk: A sudden shift in ECB policy towards tightening could further support the euro.
- Downside risk: A significant drop in oil prices may weaken the euro and adversely affect XAF stability.