GBP/XAF Outlook: Slightly positive, but likely to move sideways as the rate is above its recent average and lacks a strong driver.
Key drivers:
- Monetary policy gap: The Bank of England maintains a steady approach while the Bank of Central African States has recently raised its key interest rate, enhancing the appeal of the CFA franc.
- Oil prices: Continued stability in oil prices supports economic health in the region, which can enhance the value of the XAF as commodities significantly influence its strength.
- UK inflation: Inflation in the UK is projected to trend lower in coming months, prompting speculation about potential rate cuts from the Bank of England, which could weigh on the pound.
Range: The GBP/XAF rate is expected to drift within its recent range, with no extreme movements anticipated.
What could change it:
- Upside risk: A surprise monetary policy shift from the Bank of England could bolster the pound significantly.
- Downside risk: Any negative developments concerning inflation trends in the UK could lead to a decline in GBP strength.