Bias: The USD/XAF is bullish-to-range-bound, as it is above the 90-day average and within the upper half of the 3-month range.
Key drivers:
• Rate gap: The Federal Reserve is expected to maintain higher interest rates compared to the increased rates set by the Bank of Central African States, supporting USD demand.
• Risk/commodities: Current oil prices remain volatile but above average, which tends to support currencies like the USD, especially due to its correlation with energy prices.
• One macro factor: Recent unemployment figures from the US show a decline, which enhances the outlook for the USD and decreases expectations for Federal Reserve easing.
Range: The USD/XAF is likely to drift within the recent 3-month range as it tests the upper limits, driven by ongoing economic data releases.
What could change it:
• Upside risk: Strong economic indicators from the US could lead to further USD appreciation.
• Downside risk: A dovish tone from upcoming Federal Reserve meetings could spur a decline in the USD against the XAF.
