Bias: The bias for GBP/XOF is bullish-to-range-bound as the current rate is above the 90-day average and in the upper half of the recent three-month range.
Key drivers:
- Rate gap: The Bank of England's cautious approach towards potential rate cuts contrasts with the Bank of Central African States' recent rate increase, which supports the CFA franc.
- Risk/commodities: The decline in oil prices may negatively affect the XOF, as lower oil revenues can impact the economic stability of West African nations dependent on oil exports.
- Global trade dynamics: Ongoing geopolitical tensions, including US-China trade issues, are leading to increased demand for safe assets, affecting the GBP's performance in the currency market.
Range: The GBP/XOF is likely to drift within its recent range, maintaining stability around current levels.
What could change it:
- Upside risk: Strong UK economic data or unexpected shifts in monetary policy from the Bank of England could boost the pound against the CFA franc.
- Downside risk: Evolving geopolitical tensions or further commodity price declines may pressure the GBP, leading to a potential depreciation against the XOF.
