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Wednesday, 20 March 2019

Strong EGP stole the show last night, gold prices down

The EGP continued strengthening on Tuesday, trading at around 17.29 to the USD — and that has absolutely captured the imagination of the talking heads.

For the EGP to stay strong, we need to focus on real economy growth — FDI, tourism, remittances and exports, etc, must all pick up, economist Hany Tawfik told Masaa DMC’s Osama Kamal (watch, runtime, 04:10). Tawfik said shoring up reserves through borrowing isn’t sustainable — the key factor is to see real economic growth. The economist urged the government to continue cutting red tape and curbing corruption to improve the investment climate.

Meanwhile, CI Capital’s senior economist Hany Farahat explained on Hona Al Asma how the central bank’s decision to scrap its repatriation mechanism towards the end of last year led to an increase in inflows in the banking system that gave the EGP a push (watch, runtime: 09:31). Farahat said the decision came at just the right moment — when appetite for emerging markets began recovering after last year’s EM Zombie Apocalypse.

Why aren’t prices going down? Asked why he thinks the price of goods has yet to reflect the recent appreciation of the EGP, Farahat pointed to the fact that there’s no system that effectively tracks commodity prices. He also highlighted that Egypt tends to adjust to market changes slower than other countries. And then there’s the fact that current inventory of imports came in at the higher rate…

The local price of gold has dropped an average of EGP 5, Nady Naguib, secretary general of the gold traders division at the Cairo Chamber of Commerce, told Hona Al Asema. Naguib said the drop is directly related to the strengthening of the EGP over the past week (watch, runtime: 03:17).

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