Cairo – March 7, 2024: A day after the Central Bank of Egypt’s decision to shift to a market-driven exchange rate, JPMorgan has recommended investing in 1-year Egyptian Treasury bills at the latest auction, attributing its increased confidence in the Egyptian market to the Central Bank of Egypt’s substantial interest rates hike and exchange rate system change.
JPMorgan’s Gbolahan Taiwao expressed optimism in a note to clients, stating, “The Egypt carry trade is back in focus, and this time should be different.”
“The catalysts we have been waiting for have now materialized with the CBE hiking the policy rate aggressively at yesterday’s emergency meeting and at the same time allowing USD/LE flexibility,” he added.
Taiwao’s comments come in the wake of the Central Bank of Egypt’s bold decision to push a significant 600 basis point rate hike and commit to a market-driven system for foreign exchange.
Following the central bank's measures, the Egyptian pound experienced a record low against the USD, surpassing LE 50 on Wednesday. The LE stabilized on Thursday morning, stabilizing just above LE 49 against the USD.
JPMorgan's outlook includes a prediction of a 4 percent month-on-month increase in Egypt's inflation for February, with expectations of a slowdown later in the year.
Egypt's international bonds demonstrated positive momentum, with an increase of over two cents in the aftermath of the CBE's decision to raise interest rates by 600 basis points. Data from "Tradeweb" indicated that Egypt’s USD bonds due for repayment in 2047 jumped by 2.6 cents, reaching 82.3 cents, the data revealed.
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