USD/XPF Outlook: Slightly weaker, but likely to move sideways, as the rate is below its recent average and testing lower levels without clear direction.
Key drivers:
• Rate gap: The Federal Reserve is expected to implement rate cuts, while the stability of the CFP franc is supported by its peg to the euro, limiting its volatility against the USD.
• Risk/commodities: Oil prices have been above average recently, which can support the U.S. economy, but tariff concerns are creating uncertainty for the USD.
• One macro factor: Geopolitical tensions regarding U.S. airstrikes have heightened market volatility, affecting investor confidence in the USD.
Range: The USD/XPF is likely to drift within its recent range, possibly testing recent lows without clear momentum in either direction.
What could change it:
• Upside risk: A shift in tariff policy that reduces trade tensions could boost the USD.
• Downside risk: Further escalation in geopolitical tensions could lead to more significant USD weakness.
