Central Bank of the UAE revises up growth forecasts

The Central Bank of the UAE revised their growth outlook for 2025 to real GDP growth of 4.9%, up from 4.4% previously. They also expect the economy to accelerate to growth of more than 5% in 2026. Manufacturing, real estate, financial services and construction are all helping to support growth in the UAE, according to the central bank. The forecasts are largely in line with our own expectations for growth this year of about 5% headline GDP growth thanks to expansion in both the oil and non-oil sectors.

The UAE announced a National Policy for Economic Clusters this week with the aim of increasing GDP by AED 30bn per year. The focus will be on enhancing the UAE’s knowledge economy with specific clusters dedicated to financial services, tourism, space, communications and data as well as food.

The Bank of England kept rates unchanged at 4% at its September monetary policy committee in a 7 to 2 vote. The BoE said that any subsequent cuts would be “gradual and careful” and that inflation did remain a risk for the UK economy. Inflation in the UK has been accelerating in recent months, reaching 3.8% y/y for both August and July and up from 3% at the start of the year. The BoE also announced it would slow its pace of balance sheet run down to GBP 70bn per year from its current level of GBP 100bn.

There was more mixed data out of the US with housing starts falling 8.5% m/m to 1.31m, their lowest level since May. Housing availability remains widespread though as rates start to move lower, that should help to encourage demand. Elsewhere initial jobless claims dropped to 231k last week, down by 33k w/w and stronger than markets had been expecting. Continuing claims were also lower in the previous week at 1.92m.

The South African Reserve Bank held rates at 7% at their September meeting. Inflation and inflation expectations have been moderating in South Africa though the SARB did increase their inflation forecast, suggesting they are taking a cautious stance on policy.

Today’s Economic Data and Events

10:00 UK retail sales Aug: forecast 0.4%

Fixed Income

The better than expected initial jobless claims in the US helped to sink US Treasuries overnight. Yields on the 2yr UST added 1bps to 3.5635% while the 10yr yield was nearly 2bps higher at 4.1044%.

Local credit markets were reasonably muted overnight with an index of UAE bonds marginally lower.

Aydem Renewables, a Turkish renewable energy company, mandated banks for a USD 5yr green senior secured bond.

FX

The US dollar was broadly stronger against peer currencies overnight with EURUSD dipping by 0.2%, fading a surge earlier in the day and closing at 1.1788. USDJPY added 0.7% to 148 level while GBPUSD weakened 0.5% to 1.3533 even as the Bank of England kept rates unchanged.

Turkish lira was reasonably flat at 41.29 while the Indian rupee weakened by 0.4% to 88.1325.

Equities

US equity markets had a strong close overnight with the Dow, S&P 500 and NASDAQ all gaining. The NASDAQ in particular was up by almost 1%. European markets also had a strong session with the Euro Stoxx index up 1.6% while the FTSE was more moderate with a 0.2% gain.

In local markets the ADX 15 added 0.9% to offset losses of 0.2% in the DFM while the Tadawul was higher by 1.2%.

Commodities

Brent markets were lower by 0.8% overnight at USD 67.44/b while WTI dropped about the same amount to USD 63.57/b. US President Donald Trump called again on US partners to stop buying oil from Russia, potentially widening out the use of secondary tariffs similar to what the US has imposed on India.

Gold prices dipped overnight, falling for a second day running at USD 3,644/troy oz. Industrial metals were broadly weaker.