Egypt balance of payments data improves

Economic data was relatively limited to begin the week with no significant releases from major economies. Markets will be looking ahead to commentary from Fed Chair Jerome Powell later this week when he speaks to the US Congress. Elsewhere, the outcome of the French legislative elections resulted in a highly mixed parliament with no single party gaining anywhere close to a majority. Policymaking in the Eurozone’s second largest economy is likely to be frustrated given the president Emmanuel Macron and likely next prime minister will be from different political parties.

Egyptian remittances rose to USD 2.7bn in May according to the Central Bank of Egypt, up 69% on the USD 1.6bn remitted in May 2023, and up 23% m/m on the USD 2.2bn repatriated by workers abroad in April. Remittances into Egypt were under substantial pressure prior to the currency devaluation in March and were down 21% y/y in the first half of fiscal 2023/24, but they have picked up since then as there is more certainty around exchange rates.

The Central Bank of Egypt also reported balance of payments data for the first nine months of fiscal year 2023/24, reporting an overall surplus of USD 4.1bn thanks to a surge in last quarter following the devaluation of the Egyptian pound. The current account recorded a deficit of USD 17.1bn, impacted by a drop in Suez Canal transit income and a drop in remittances up to that point. However, the capital and financial accounts saw a net inflow of USD 20bn thanks to substantial FDI inflows of almost USD 24bn related to the UAE’s investment into the Ras el Hekma project while portfolio investment also improved to almost USD 15bn as foreign investors have bought up Egyptian government bonds.

Today’s Economic Data and Events

• 20:00 US Short-term Energy Outlook

Fixed Income

• Treasury markets were relatively quiet to start the trading week. Yields on the 2yr UST rose by slightly more than 2bps to 4.6825% while 10yr yields closed the day flat at 4.2783%. European benchmark bonds were generally stronger with French 10yr yields dropping almost 5bps to 3.161% while gilts and bunds were modestly stronger.

FX

• The US dollar recovered some ground after a week’s worth of losses. EURUSD showed a resilient response to the outcome of the French elections but ended the day lower by about 0.15% to settle at 1.0824. GBPUSD was near unchanged, closing at 1.2807 while USDJPY settled at 160.83, marginally higher.
• Commodity currencies closed mixed with AUDUSD down 0.18% at 0.6737 while USDCAD moved in favour of the Loonie, dropping by 1.3635. Swiss Franc weakened more substantially with a 0.22% rise to 0.8977.

Equities

• US equity markets had a positive start to the week with the S&P 500 index adding 0.1% while the NASDAQ moved higher by almost 0.3%. However, the overall Dow Jones index closed near unchanged. European markets were consistently negative with declines in the Euro Stoxx as well as the FTSE.
• Asian markets have opened in mixed conditions today with the Nikkei up a strong 1.3% while the Hang Seng is off by about 0.5%.

Commodities

• Front month oil prices dropped yesterday as markets look to signals from the IEA and OPEC to be released later this week. Brent dropped 0.9% to USD 85.75/b while WTI was lower by 1% to USD 82.23/b. Hurricane Beryl made landfall across Mexico and the US over the last few days, disrupting civil infrastructure and power but likely with limited lasting impact on oil and gas production.