Political Risks Weigh On EGP

We believe that the Egyptian pound will stabilise around the EGP5.70/US$ level. This is in spite of the euro gaining ground against the US dollar lately. The pound has responded as expected to the recent euro rebound by falling from EGP6.75/EUR to EGP7.04/EUR over the last month. However, the fact that it has failed to follow the euro's bounce against the dollar is a warning that there is downside pressure on the pound which is unrelated to the US$/EUR trade and global risk sentiment. Political risk remains high and the recovery is not quite as robust as the headline figure suggests.

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