USD/XOF Outlook: Slightly weaker, but likely to move sideways, as the rate is below its recent average and positioned near recent lows.
Key drivers:
- The Federal Reserve's anticipated rate cuts may continue to weigh on the US Dollar's strength against the CFA Franc.
- The recent tightening of monetary policy by the Bank of Central African States aims to bolster the CFA Franc amid falling reserves, providing some support.
- Senegal’s exploration of currency alternatives could introduce uncertainty around the long-term stability of the XOF, affecting confidence in the currency.
Range: The USD/XOF is likely to drift within its recent range as external factors balance each other out.
What could change it:
- Upside risk could arise if stronger-than-expected US labor market data leads to reduced expectations of Fed rate cuts.
- Downside risk might emerge if ongoing geopolitical tensions trigger further weakness in the US Dollar.
