EUR/XOF Outlook:
The EUR/XOF is likely to move sideways as it is near its recent average and trading within a stable range. The overall market is showing mixed signals with no clear driving factors pushing the rate decisively in either direction.
Key drivers:
- Rate gap: The European Central Bank is maintaining a stable interest rate, which supports the euro as compared to the CFA Franc, whose reform discussions could impact economic stability in the region.
- Risk/commodities: Oil prices have recently seen significant volatility, trading above average levels, which indirectly supports the euro by affecting import costs and economic activity within the Eurozone.
- One macro factor: The reform of the CFA Franc into the new Eco currency signifies a significant shift in West Africa’s monetary policy that could influence investor confidence moving forward.
Range:
Expect the EUR/XOF to hold within its recent range as conditions remain stable.
What could change it:
- Upside risk: A resolution to the geopolitical tensions affecting Europe could strengthen the euro significantly.
- Downside risk: Deterioration in the economic outlook for West Africa due to the CFA reform could lead to weakness in the XOF.
