The EUR/XAF exchange rate appears to be range-bound in the near term, holding steady at its three-month average of 656.
Key drivers influencing this exchange rate include the interest rate policies of the European Central Bank (ECB) and the attractiveness of the Eurozone's economic outlook. While the ECB recently kept rates steady, President Christine Lagarde's caution about the euro’s strength could limit appreciation, highlighting the delicate balance of economic growth against inflation control. Additionally, Germany's improved consumer confidence may provide some upward momentum for the euro. On the XAF side, recent strength against the US dollar could bolster confidence, especially as China ramps up investment in Cameroon, potentially increasing economic activity.
In the next couple of months, the EUR/XAF is likely to stay within a consistent range unless significant external events occur. An upside risk could come from improving Eurozone economic data or a softening of local currency reform discussions. Conversely, a downside risk exists from renewed geopolitical tensions related to the ongoing war in Ukraine, which could negatively impact the euro further.
