Central Bank of Egypt keeps on hold

tThe Central Bank of Egypt kept its interest on hold at its MPC meeting yesterday, leaving the benchmark overnight deposit rate at 24.00%. We had anticipated a 100bps cut, especially after the slowdown in June inflation in data released earlier this week, but the bank is maintaining its cautious approach in the midst of government subsidy adjustments. It has signposted a ‘wait-and-see’ approach before further easing to ‘allow time to gauge the possible effects of recently announced legislative amendments, such as value-added tax reforms.’ We still see scope for easing through the end of the year as some of H2 2024’s fiscal adjustments will start passing through the base, leaving Egypt’s real interest rates even higher than the 9.1% presently.

Headline industrial production in Saudi Arabia rose 1.5% y/y in May, and 2.5% m/m. This marked a slowdown from the 3.1% annual growth seen in April, driven by manufacturing growth slipping to 0.9% from 7.4% previously. On the other hand, mining & quarrying growth accelerated to 2.1% y/y, the strongest annual growth rate since early 2023 as Saudi Arabia ramped up its oil production to 9.18mn b/d in May, from 8.99mn b/d in April. We expect that the industrial production index will see stronger growth through the second half of the year given the recent OPEC+ decision to further accelerate the return of barrels to the market.

The US could impose tariffs as high as 35% on goods entering from Canada as the northern neighbour is the latest country to be told what its new rate will be following the recent extended hiatus. While there is expected to be a carve-out for energy imports and those related to the automotives sector, leaving them at 10%, and goods covered by the North America trade deal will be exempt, this is still higher than the 25% initially signalled on 2 April. Trump has told the news that he expects most trading partners to have a blanket tariff of 15%-20%.

Initial jobless claims in the week to July 5 stood at 227,000, down from 232,000 the previous week and lower than the predicted 235,000. Continuing claims in the preceding week were in line with expectations at 1.965mn, up modestly from the 1.955mn on the previous print.

Today’s Economic Data and Events

10:00 UK GDP, May, % m/m. Forecast: 0.1%

10:00 UK industrial production, May, % m/m. Forecast: -0.1%

11:00 Turkey current account balance, May, USD. Forecast: -0.90bn

16:30 Canada unemployment rate, June. Forecast: 7.1%

Fixed Income

• USTs sold off yesterday, with yields rising across the curve at the close, despite a later rally on the back of a strong 10yr auction. The 10yr yield closed at 4.3498%, up 2bps, after earlier hitting as high as 4.3715%. Yields on the 2yr closed up 3bps at 3.8721%.
• Türkiye has mandated banks for a EUR benchmark 6yr bond to price around 5.5%. The net proceeds will be used for ‘general budgetary purposes.’

FX

• The dollar index gained for a fifth straight session yesterday as it closed up 0.1% against its basket of peers, boosted by concerns around the impact of trade wars on other economies.
• The CAD strengthened yesterday, adding 0.2% to 1.3655, as did its fellow commodity currencies the AUD and the NZD which closed up 0.8% and 0.6% respectively. The Loonie is selling off this morning however on the back of the latest tariff news.
• EUR and GBP both sold off modestly yesterday, falling 0.2% and 0.1% respectively, taking them to 1.1701 and 1.3579.

Equities

• US equity markets gained yesterday with the NASDAQ, the S&P 500, and the Dow Jones adding 0.1%, 0.3%, and 0.4% respectively.
• The DFM closed down 0.1% while the ADX and the Tadawul both closed almost flat.

Commodities

• The latest tariff news weighed heavily on oil markets yesterday, with Brent futures dropping 2.2% to USD 68.6, and WTI closing down 2.7% to USD 66.6/b.
• Both benchmarks are trading higher this morning as markets wait to see what President Trump has in mind in terms of new sanctions on Russia.
• OPEC+ has signalled that it could pause its bringing extra barrels back onto the market from September.