The EUR/XAF exchange rate is range-bound, holding steady around its three-month average of 656. The main factors influencing this stability include:
- The European Central Bank's cautious stance on interest rates, balancing inflation control with economic growth, while the XAF recently appreciated against the US dollar due to increased economic activity from investments.
- The geopolitical situation, particularly the ongoing war in Ukraine, continues to create uncertainty for the euro, affecting its performance in the global market.
- Economic growth projections for the eurozone are positive, with expected GDP growth supported by renewed fiscal measures, which may further bolster the euro.
In the near term, the exchange rate is likely to see fluctuations within a defined range based on prevailing conditions. The upside risk would be strong economic recovery signals from the eurozone or a resolution to geopolitical tensions, while a downside risk could stem from prolonged instability in the region or proposed changes to the CFA franc system impacting the XAF.