Bias: The outlook for USD/XOF is range-bound as the current level is near the 90-day average and sits in the middle of the 3-month range.
Key drivers:
- Rate gap: The U.S. Federal Reserve's potential shift towards lower interest rates contrasts with the Bank of Central African States’ recent increase in its policy rate to support the XOF, maintaining a competitive stance.
- Risk/commodities: Fluctuations in oil prices may impact the USD's strength, as the U.S. relies on oil exports, influencing demand for the dollar against the XOF.
- One macro factor: Recent geopolitical tensions following U.S. airstrikes in Venezuela could lead to increased volatility for the USD, affecting its valuation.
Range: The USD/XOF pair is expected to hold steady within the recent 3-month range, with minor movements likely due to current factors.
What could change it:
- Upside risk: An unexpected robust job report in the U.S. could bolster the USD.
- Downside risk: A dovish statement from Federal Reserve officials could weaken the USD against the XOF.
