USD/XAF Outlook:
Bearish, as the rate is below its recent average and near recent lows.
Key drivers:
• Rate gap: The Federal Reserve holds interest rates steady while the Bank of Central African States tightens its monetary policy, widening the gap between USD and XAF interest rates.
• Risk/commodities: The price of Brent Crude oil remains below average, which impacts the economies tied to oil in the CEMAC zone, thereby affecting the XAF negatively.
• One macro factor: The ongoing "sell America" trend reflects investor concerns about U.S. geopolitical tensions and the weakening dollar against major currencies.
Range:
Expect movement to drift within the recent range but closer to the lower end.
What could change it:
• Upside risk: A strong rebound in the U.S. labor market could lead to increased confidence in USD stability.
• Downside risk: Further geopolitical tensions that prompt more investors to pull back on USD exposure could push the rate lower.
