USD/XOF Outlook: Slightly weaker, but likely to move sideways due to its position below the recent average and within a stable range.
Key drivers:
- Rate gap: The Federal Reserve is expected to cut interest rates while the Bank of Central African States has raised its main policy rate, supporting the XOF against the USD.
- Risk/commodities: Fluctuating oil prices have put additional pressure on the US dollar, reflecting concerns from tariff threats that may hamper US exports.
- One macro factor: Recent geopolitical tensions, including U.S. airstrikes in Venezuela, are adding volatility to the USD, influencing perceptions and trade behavior.
Range: Expect the USD/XOF to hold steady within its recent 3-month range, with minimal movement outside of established levels.
What could change it:
- Upside risk: A sudden increase in US economic data, such as strong labor reports, could boost the USD.
- Downside risk: Further developments in US tariff policies that heighten trade tensions may weaken the USD further.
