Bias: Range-bound, as EUR/XOF sits near the 90-day average and in the middle of the 3-month range.
Key drivers:
- Rate gap: The ECB remains neutral while BEAC tightens, which tends to support the CFA franc and cap EUR gains against XOF.
- Oil: Oil is at 30-day highs and volatile; higher energy costs can lift euro-area inflation expectations and keep euro steadier versus XOF.
- Macro factor: The ECB inflation trajectory and stance guide decisions, with neutrality likely to persist and a policy shift possible if price pressures rise.
Range: EUR/XOF is expected to drift within the 3-month range, with little breakout risk and occasional moves toward the middle, unless external shocks hit.
What could change it:
- Upside risk: A clearer ECB signal of tightening if inflation remains sticky, pushing EUR higher against XOF, as energy costs feed into policy expectations.
- Downside risk: BEAC tightening or a renewed energy shock that strengthens XOF on the peg, weighing on EUR/XOF.
