USD/XPF Outlook:
The USD/XPF is likely to increase as it trades approximately 1.3% above its 3-month average and near recent highs. The elevated geopolitical tensions are pushing investors towards the US dollar as a safe-haven asset.
Key drivers:
• Rate gap: The Federal Reserve's tight monetary policy contrasts with the relaxed stance of the CFP Franc's central bank, supporting USD strength.
• Risk/commodities: Rising oil prices due to Middle East tensions heighten global demand for USD, as oil transactions are typically dollar-denominated.
• One macro factor: The uncertainty in global market growth linked to geopolitical risks increases the appeal of the USD for investors.
Range:
Expect the USD/XPF to test the higher end of its recent 3-month range, potentially aiming towards 103.0.
What could change it:
• Upside risk: Positive US economic data, like a strong services PMI, could further bolster the USD.
• Downside risk: A de-escalation in geopolitical tensions could weaken USD demand, resulting in drops.