USD/XAF Outlook:
The USD/XAF is slightly positive but likely to move sideways as it is just below its recent average and trading near mid-range levels. Recent economic indicators show a resilient US labor market, which supports the dollar's strength.
Key drivers:
- Rate gap: The US Federal Reserve's monetary policy is currently more hawkish compared to the more stable approach of the Bank of Central African States, providing some support for the USD.
- Risk/commodities: Oil prices are stabilizing, which can impact the XAF positively, given its connection to regional economies reliant on oil exports.
- Macro factor: The recent CEMAC budget approval indicates a commitment to regional stability, which may bolster the XAF, although challenges remain.
Range:
USD/XAF is likely to drift within its recent 3-month range, experiencing fluctuations but remaining largely stable.
What could change it:
- Upside risk: A stronger-than-expected US economic report could support the dollar further.
- Downside risk: Signs of a fiscal imbalance in the CEMAC region or adverse geopolitical developments may weaken the XAF.