GBP/XOF Outlook:
The GBP/XOF rate is slightly weaker and likely to move sideways, currently trading below its recent average and near recent lows. This reflects ongoing pressure from the Bank of England's cautious monetary policy and domestic political uncertainties.
Key drivers:
• Rate gap: The Bank of England's cautious stance contrasts with the West African Central Bank's commitment to stability, which includes ruling out any devaluation of the CFA franc.
• Risk/commodities: Recent oil price trends have remained volatile, impacting currencies dependent on oil revenue. This bites into the stability of currencies like the XOF.
• One macro factor: Ongoing UK political jitters are raising concerns about the future of current leadership, adding to pressure on the pound.
Range:
Expect the GBP/XOF to hold within its recent range, likely influenced by prevailing domestic issues.
What could change it:
• Upside risk: A surprising recovery in UK retail sales could shift expectations on the Bank of England's interest rates.
• Downside risk: Continued weak economic data or further speculation about interest rate cuts from the BoE could push the rate lower.