The EUR to XOF exchange rate shows a bearish market bias, with the euro struggling against the West African CFA franc.
Key drivers influencing this trend include:
- Interest rate differential: The European Central Bank has opted to maintain its interest rates, which may weaken the euro's appeal compared to potentially more aggressive monetary policies elsewhere.
- Economic stability: The exit of Burkina Faso, Mali, and Niger from ECOWAS raises concerns about the future of the XOF as these nations form the Alliance of Sahel States, which may affect demand for the currency.
- International commodity prices: Oil prices have been volatile, currently trading below their three-month average, impacting inflation and trade dynamics in both the Eurozone and the West African region.
The near-term trading range for EUR/XOF is expected to remain steady, reflecting the current stability at around the three-month average.
Upside risks could stem from improved economic indicators in the Eurozone, while downside risks may arise from further geopolitical tensions or the potential introduction of a new currency by the Sahel states.