USD/XOF Outlook: The outlook is slightly weaker, but likely to move sideways as the rate is below its recent average and within the mid-range of the past three months.
Key drivers:
- Rate gap: The U.S. Federal Reserve's pause on rate cuts contrasts with the stability measures exhibited by the Bank of Central African States, supporting the XOF.
- Risk/commodities: Oil prices have been experiencing volatility, which typically impacts the XOF, given West Africa's reliance on oil exports for economic stability.
- One macro factor: Côte d'Ivoire's steady economic growth remains a positive signal for the XOF, contributing significantly to the WAEMU's GDP.
Range: Movement in the USD/XOF exchange rate is likely to hold steady within its recent range, as current pressures lack a strong directional driver.
What could change it:
- Upside risk: A strong improvement in U.S. economic data, such as manufacturing activity, could bolster the USD.
- Downside risk: Continued geopolitical tensions and investor shifts away from U.S. assets could further depress the USD's value.
