Research Department at HC securities expects the inflows of foreign currency through the interbank systems to result in change in the FX rates reflecting supply and demand forces, supporting a floating currency mechanism.
HC however, expects commercial banks to show limited ability to support the Egyptian Pounds at current rates due to holding a net foreign liability position.
According to its record regarding Egypt macro economics, it projects that the EGP might be devaluated by 5-10 percent over 2019.
Accounting for the potential devaluation, HC expects inflation to average 16%-17% over 2019, hence they do not expect interest rate cuts throughout 2019
Foreign holding of Egyptian T-bills declined to $11.8 billion in October 2018 from $21.5bn in March, a total outflow of $9.7bn. Around $8bn of the outflows were covered by commercial banks shifting them to a net foreign liability position of $3.9bn as of September.
While the remaining $1.7 billion were covered from the repatriation of foreign investors fund which declined to $7.8 billion as of the end of October from $9.7 billion in March.
