The GBP to XOF exchange rate shows a bearish market bias as concerns surrounding the UK's monetary policy and emerging developments in the West African region weigh on the pound's outlook.
Key drivers include:
- Interest rate differential: Analysts project the Bank of England to cut rates to 3.25% amid slowing inflation and growth, while the Federal Reserve takes a more cautious approach with incremental decreases in rates.
- Political uncertainty: The exit of Burkina Faso, Mali, and Niger from ECOWAS raises risks for the XOF as they consider launching a new currency, impacting demand for the franc.
- Economic indicators: UK economic growth is forecasted to decelerate, with GDP growth expected at only 1.4%, further pressuring the pound.
The GBP/XOF is currently trading near recent highs, expected to maintain a range around these levels based on recent data. Upside risks could arise from stronger than expected UK economic data, while downside risks stem from ongoing geopolitical tensions that may destabilize the XOF.