GBP/XOF Outlook: Slightly positive, but likely to move sideways as the rate is above its recent average but lacks a clear driver.
Key drivers:
• Rate gap: The Bank of England is expected to cut rates, contrasting with the Bank of Central African States' tightening measures to support the CFA franc.
• Risk/commodities: Oil prices remain below average, which can weigh on the UK's economic performance as it is a significant importer of energy goods.
• One macro factor: UK GDP growth is projected to slow, largely due to stagnant household incomes and reduced public spending.
Range: The GBP/XOF is likely to drift within its recent range as bullish and bearish signals are mixed.
What could change it:
• Upside risk: An unexpected increase in UK economic data could boost the GBP.
• Downside risk: Further tightening of monetary policy by the BEAC amid falling reserves may lend strength to the XOF.