USD/XAF Outlook:
The USD/XAF is slightly weaker, but likely to move sideways as it is just below its recent average and near the mid-range of the past three months.
Key drivers:
• Rate gap: The Federal Reserve's monetary policy is perceived as tightening, benefiting the USD, while the BEAC has emphasized the stability of the XAF.
• Risk/commodities: Recent rises in safe-haven demand due to geopolitical tensions have supported the USD against the XAF.
• One macro factor: The recent approval of a budget increase in the CEMAC region aims to strengthen regional development, which could positively impact the XAF over time.
Range:
Movement is likely to hold within the recent 3-month range, with the rate expected to stay stable but could test extremes if driven by external factors.
What could change it:
• Upside risk: A significant improvement in US economic data could bolster the USD further.
• Downside risk: Deteriorating conditions in the CEMAC region or rumors of XAF devaluation could pressure the XAF.
