Bias: The USD/XPF remains bullish, trading above its 90-day average and within the upper half of its 3-month range.
Key drivers:
- Rate gap: The Federal Reserve's approach to potential rate cuts contrasts with the CFP Franc's stability, heavily influenced by its peg to the euro, supporting the USD.
- Risk/commodities: Recent geopolitical tensions have increased demand for the USD, leading to an upward trend against the XPF.
- Macro factor: Low inflation in the French Pacific territories helps maintain the stability of the CFP Franc, counteracting some of the USD's strength.
Range: The USD/XPF is expected to drift within its recent range, possibly testing the higher extremes.
What could change it:
- Upside risk: A stronger-than-expected US labor market report could boost the USD further.
- Downside risk: Dovish comments from Federal Reserve officials may weaken the USD's position.