EUR/XAF Outlook:
The EUR/XAF outlook is slightly positive, but likely to move sideways as it is near its recent average and has no clear driver.
Key drivers:
• Rate gap: The European Central Bank has maintained its interest rate at 2%, while the Bank of Central African States raised its main rate to 4.75%, supporting the stability of the CFA franc.
• Risk/commodities: Oil prices are at 90-day highs, which can benefit the Central African economy and support the XAF.
• One macro factor: Eurozone inflation has fallen below the ECB's target, raising concerns about potential future rate cuts.
Range:
EUR/XAF is expected to hold steady within its recent range as signals are mixed.
What could change it:
• Upside risk: A resolution in the Russia-Ukraine conflict could boost the euro significantly.
• Downside risk: Increased oil price volatility could negatively affect economic conditions in the CEMAC zone.