USD/EGP Outlook: Slightly positive, but likely to move sideways, as the rate is near its 90-day average and lacks a clear driver.
Key drivers:
- Rate gap: The Federal Reserve's plan to initiate rate cuts could weaken the USD relative to the EGP, as the Central Bank of Egypt's aggressive easing may support the EGP.
- Risk/commodities: The recent retreat of the USD, influenced by geopolitical tensions, makes room for the EGP to strengthen, especially as the USD falls below previous thresholds against the pound.
- One macro factor: Positive economic forecasts for Egypt, including GDP growth projections by Standard Chartered, suggest an improving environment for the EGP.
Range: USD/EGP is likely to drift within its recent range as neither currency shows strong domination in the current context.
What could change it:
- Upside risk: A stronger-than-expected core PCE index in the US could halt USD's decline.
- Downside risk: Renewed geopolitical tensions escalating could further weaken the USD against the EGP.
