EUR/XOF Outlook:
The EUR/XOF pair is likely to move sideways as it trades near its recent average. It is currently at 90-day highs, but lacks a clear driver that could push it further in either direction.
Key drivers:
• Rate gap: The European Central Bank's inflation management strategies are directly impacting the value of the euro compared to the West African Central Bank's stable stance for the XOF.
• Risk/commodities: Oil prices are notably above average, which tends to support the euro, but volatility can create uncertainty in the market.
• One macro factor: Reforms to the CFA franc and its ongoing connection to the euro may influence perceptions of risk around the XOF.
Range:
Expect the EUR/XOF to hold steady within its recent range, as both currencies display little volatility.
What could change it:
• Upside risk: A significant improvement in the eurozone's economic indicators or robust inflation control could strengthen the euro.
• Downside risk: Any signs of political instability or renewed concerns about the CFA franc's reform might pressure the XOF.
