EUR/XPF Outlook:
Slightly positive, but likely to move sideways, as the rate is near its recent average and lacks a clear driver.
Key drivers:
• Rate gap: The European Central Bank (ECB) maintains its benchmark rate while there is projection for slight depreciation of the XPF against the Euro, indicating a supportive gap for EUR strength.
• Risk/commodities: Oil prices are currently volatile and significantly above the 3-month average, which can strengthen the Euro against the XPF as higher energy costs can impact import dynamics in the Eurozone.
• One macro factor: The easing of Eurozone inflation to 1.7% raises questions about future ECB actions, potentially influencing the Euro's strength moving forward.
Range:
Expect the EUR/XPF to hold steady within its recent range, as the rate is near its 3-month average and has demonstrated limited fluctuation.
What could change it:
• Upside risk: Stronger than expected economic data from the Eurozone could shift interest rate expectations upward.
• Downside risk: A significant natural disaster impacting French Polynesia and the surrounding regions might negatively affect the XPF.