Central Bank of Egypt cuts interest rates

The Central Bank of Egypt cut its benchmark interest rates by 200bps yesterday, taking the overnight deposit rate to 22.00%. After picking up on the back of government fiscal adjustments to subsidies, headline CPI has been cooling once more, falling back to 13.9% y/y in July and giving the CBE greater space to cut. This is especially the case given that the EGP has been strengthening in recent months, and it appears likely that the US Fed is set to resume its own rate-cutting cycle next month.

US GDP growth for Q2 was revised up on the second reading, now standing at 3.3% q/q annualised, compared with 3.0% on the initial print. Personal consumption was up 1.6% q/q, rather than 1.4%. Net exports remained the major driver of growth, contributing 5.0ppts, offset by a 3.3ppts fall in inventories. The third quarter should see somewhat cleaner GDP figures, when the surge in imports seen in Q1, and their reversal in Q2, have passed through. Consensus forecasts put 2025 growth at 1.6% y/y for 2025, down from 2.8% in 2024 but still stronger than had been anticipated earlier in the year when the stringent tariff regime was first introduced. Meanwhile, weekly initial jobless claims in the US were at 229,000 in the week to August 23, down from the 234,000 seen the previous week.

Industrial production in India climbed 3.5% y/y in July, up from 1.5% in June and well above the predicted 2.2% expansion rate. There were robust gains in manufacturing production, which was up 5.4%, consumer durables rose 7.7%, and infrastructure goods were up 11.9%, offsetting a 7.2% y/y fall in mining production. India’s second quarter GDP results are due today, with 6.7% forecast.

Today’s Economic Data and Events

14:30 India GDP, % y/y, Q2. Forecast: 6.7%

16:30 US PCE price index, % y/y. Forecast: 2.6%

Fixed Income

• The upgrade to US GDP growth for Q2 dented rate cut expectations a little yesterday, prompting a sell-off at the shorter end of the curve. Yields on the 2yr rose 2bps to close at 3.6290%, while the 10yr yield fell 3bps to 4.2033%.

FX

• The dollar index closed down 0.4% on Thursday, losing ground against most major currencies. Commodity currencies in particular had a strong day with CAD up 0.3% while both AUD and NZD closed 0.4% stronger.
• EUR also added 0.4% against the greenback to close at 1.1683, while GBP lagged with a 0.1% gain to 1.3513.

Equities

• US equity markets closed up yesterday, with the Dow Jones, S&P 500, and the NASDAQ adding 0.2%, 0.3%, and 0.5% respectively.
• Locally, the ADX closed down 0.6% while the DFM ended the day 0.7% lower. Saudi Arabia’s Tadawul ended the day down 0.7% as well, meaning a 1.2% w/w fall on its last trading day of the week.

Commodities

• Oil prices gained for the second day running yesterday, though with both benchmarks trading down this morning they still look set to end with a monthly loss as supply growth concerns remain to the fore.
• Brent futures closed up 0.8% at UST 68.6/b while WTI added 0.7% to USD 64.6/b.