Bias: Bearish-to-range-bound: USD/EGP is below its 90-day average and sits in the lower half of the 3-month range, with risk tilted to limited downside unless flows turn.
Key drivers:
- Rate gap: The Fed is expected to ease toward a neutral stance in 2026, while Egypt has begun easing, narrowing policy divergence between the two central banks and reducing pressure on the EGP from carry trades.
- Macro factor: Egypt’s inflation trajectory cooling and growth prospects for 2026 point to a softer monetary stance that can underpin the pound, with policymakers signaling tolerance for gradual price declines.
Range: Expect the pair to drift within the recent band, hovering near the lower end and near 30-day lows, with occasional tests toward the middle.
What could change it:
- Upside risk: a stronger US jobs picture or a hawkish Fed tone lifting the dollar.
- Downside risk: deeper Fed easing expectations or softer US data easing pressure on the dollar and supporting the EGP.
