The EUR to XOF market currently shows a range-bound bias.
Key drivers include the interest rate differential affected by the European Central Bank's (ECB) flexible policy approach which aims to balance inflation control with economic growth. Additionally, the eurozone's projected GDP growth adds some optimism, while geopolitical tensions related to the ongoing conflict in Ukraine continue to weigh on market sentiment.
In contrast, the XOF faces uncertainty as Burkina Faso, Mali, and Niger have withdrawn from ECOWAS, potentially undermining the currency's stability, especially with plans for a new currency in the Alliance of Sahel States.
In the near term, the EUR to XOF exchange rate is expected to remain steady, tracking close to its 3-month average. Upside risks include improved economic conditions in the eurozone, while downside risks stem from potential geopolitical escalations or further instability in the Sahel region.