EUR/XOF Outlook:
The EUR/XOF is slightly positive but likely to move sideways. It is near its recent average and has traded within a stable range, indicating that neither currency is facing strong pressure.
Key drivers:
• Rate gap: The European Central Bank maintains interest rates, while the upcoming transition from CFA franc to the Eco hints at shifts in the West African monetary policy, keeping the euro supported.
• Risk/commodities: Currently, oil prices are at 90-day highs, which can influence the euro as higher oil prices could impact inflation dynamics in the Eurozone.
• One macro factor: The upcoming German CPI data could affect euro strength, but forecasts suggest modest cooling, which may limit upside potential.
Range:
The EUR/XOF is likely to hold within its recent narrow range as both currencies avoid significant fluctuations.
What could change it:
• Upside risk: A surprising increase in Eurozone economic data could strengthen the euro.
• Downside risk: Compounding pressures from geopolitical tensions or poor economic indicators in the Eurozone could weaken the euro further.
