Egypt inflation slows in June

CPI inflation in Egypt slowed to 14.9% y/y in June, down from 16.8% the previous month. Prices were lower than in May, dropping 0.1% m/m. The fall in annual inflation was largely driven by a slowdown in food prices which were up 6.9% y/y, compared with 11.2% in May. The disinflationary trend in Egypt has been somewhat disrupted in recent months by government adjustments to subsidies, but with base effects set to pass through as some of those changes were implemented in the second half of last year, we expect that price growth should ease through the end of 2025. The Central Bank of Egypt is due to meet today and the slowdown in June inflation has reaffirmed our view that the bank will cut the overnight deposit rate by 100bps, taking the benchmark rate to 23.00%.

The Saudi government has approved a new law that will allow foreign ownership of real estate from January 1. Ownership will be allowed in specific areas, largely in Riyadh and Jeddah with more details to follow. The news has given a boost to Saudi real estate stocks.

The US government has sent the second round of tariff letters to seven countries, namely Algeria, Iraq, Libya, and Sri Lanka which will all face 30%, Brunei and Moldova which will face 25%, and Philippines which will face 20%. Further, an additional letter was sent to Brazil which raised their new tariff rate to 50%, far higher than the 10% initially implemented on April 2. The new rates are set to come into force from August 1, as is a 50% tariff on copper imports which Donald Trump reaffirmed yesterday.

The FOMC released the minutes from its June 18 meeting yesterday where the Fed funds rate was kept on hold at with the upper bound at 4.50%. The minutes show an increasing divide between committee members around the impact tariffs would have on inflation with ‘most participants’ expecting a persistent effect on price growth. The minutes also noted the high level of uncertainty around government policy and geopolitical risk which makes their projections especially difficult.

Today’s Economic Data and Events

16:30 US initial jobless claims, week to July 5. Forecast: 235,000

Egypt overnight interest rate. Forecast: 23.00%

Fixed Income

• USTs rallied yesterday after an auction for 10yr notes drew strong demand. Yields on the 10yr fell 7bps to 4.3320%, while the 2yr dropped 5bps to 3.8429%.

FX

• The dollar index was almost unchanged yesterday, closing up against its basket of peers by less than 0.1%. There was almost no movement for EUR or GBP, both of which closed down by less than 0.1% to 1.1720 and 1.3586 respectively.
• JPY strengthened by 0.2% to 146.33.

Equities

• US equity markets had a positive day yesterday, boosted by a strong performance for Nvidia in particular. The NASDAQ added 0.9% on the day, followed by the S&P 500 (0.6%) and the Dow Jones (0.5%).
• Locally, the DFM added 0.7% while the ADX closed 0.4% higher. Saudi Arabia’s Tadawul closed down 0.1%.

Commodities

• General risk-on sentiment saw Brent futures close up 0.8% to USD 70.2/b yesterday while WTI climbed 0.6% to USD 68.4/b as the EIA reported that US crude stockpiles rose by 7.1mn bbl last week.
• The UAE’s energy and industry minister, Suhail al-Mazrouei commented on the OPEC+ decision to accelerate the return of barrels to the market made over the weekend. Speaking outside an OPEC event in Vienna, Mazrouei said that the oil market needed the extra barrels presently, giving as justification the fact that there has not been a recent rise in global inventories even following previous recent increases in planned production.