USD/XAF Outlook:
Bearish, as the rate is below its recent average and near recent lows, struggling against several pressures.
Key drivers:
• Rate gap: The Federal Reserve's decision to hold interest rates reflects uncertainty in the US economy, putting pressure on the USD against the more stable XAF.
• Risk/commodities: A downturn in oil prices has negatively impacted economies dependent on oil, affecting the XAF; however, the XAF benefits from a tightening monetary policy by the Bank of Central African States.
• One macro factor: Concerns about the US labor market and geopolitical tensions have led to a decline in the dollar's attractiveness.
Range:
Expect the USD/XAF to drift within its recent range, with potential for slight fluctuations depending on economic indicators.
What could change it:
• Upside risk: A stronger than expected consumer demand in the upcoming US retail sales report could bolster the USD.
• Downside risk: Further devaluation rumors or economic slowdowns in the CEMAC zone may put additional pressure on the XAF.
