GBP/XAF Outlook:
The GBP/XAF exchange rate is slightly weaker, but likely to move sideways as it currently trades just below the recent average and remains within its mid-range. There are mixed signals that could influence its near-term movement.
Key drivers:
• Rate gap: The Bank of England's cautious approach to interest rates is contrasted by the Central African States' commitment to currency stability, impacting GBP's relative strength.
• Risk/commodities: Current oil prices are fluctuating, which contributes to regional economic uncertainty, potentially influencing the XAF's performance.
• Macroeconomic factor: Ongoing geopolitical tensions are leading to increased risk aversion, which could cause fluctuations in the GBP.
Range:
The GBP/XAF is expected to hold within its recent 3-month trading range, showing limited movement as mixed signals prevail.
What could change it:
• Upside risk: An improvement in UK retail activity as indicated by upcoming economic data could boost GBP.
• Downside risk: Heightened geopolitical tensions could provoke further risk aversion, negatively impacting the pound's value.