Bias: The bias is range-bound as the EUR is steady at its 3-month average and positioned in the middle of the recent range.
Key drivers:
- Rate gap: The European Central Bank has maintained a neutral stance while the Bank of Central African States recently raised its interest rate to support the XOF, creating a divergence in monetary policy.
- Risk/commodities: Oil prices are currently above their 3-month average, which could favor the euro, given its influence on European economic stability and energy costs.
- One macro factor: The contraction in German exports has added pressure on the euro, signaling potential weaknesses in the Eurozone’s economy.
Range: Movement for EUR/XOF is likely to hold steady within the recent range as both currencies navigate their respective economic challenges.
What could change it:
- Upside risk: An unexpected recovery in Eurozone economic data could boost the EUR against the XOF.
- Downside risk: Continued geopolitical tensions and negative trade data from Europe could weaken the euro further.