USD/XAF Outlook: Likely to decrease, consistent with the rate being below its recent average and near recent lows.
Key drivers:
• Rate gap: The US Federal Reserve's expected interest rate cuts are weakening the dollar compared to the Central African Economic and Monetary Community's (CEMAC) more stable monetary policy.
• Risk/commodities: Oil prices remain under pressure, which negatively impacts the economies in the CEMAC region, causing concerns about the value of the XAF.
• One macro factor: Concerns about fiscal sustainability in Cameroon, driven by a high budget deficit, could negatively affect investor confidence in the region.
Range: The USD/XAF is likely to drift lower within its recent 3-month range.
What could change it:
• Upside risk: A significant improvement in global sentiment could lead to renewed interest in USD assets.
• Downside risk: Increased geopolitical tensions, especially related to the US's military actions, could add more pressure to the USD.
