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Sunday, 7 July 2019

What we’re tracking on 4 July 2019

Good morning, friends, and welcome to the last day of the week. May we start off by saying we are very happy that we are just hours away from enjoying the calm that will take over Cairo thanks to the weekly exodus to Sahel?

Our elected representatives may not be as happy, as an extended legislative cycle starts to nibble away at their beach time: The House of Representatives has postponed the start of the summer recess into July as it rushes to finish its legislative duties. MPs were originally due to begin their three-month holiday at the end of June, but our sources tell us that the legislative session has been extended in order to vote on legislation yet to make its way to the House.

The PMI results are in — and we saw a marginal improvement from the previous month. Non-oil business activity continued to contract in June, but at a slightly slower rate than the month prior. We have chapter and verse in this morning’s Speed Round, below.

Finance Minister Mohamed Maait is in Napoli, Italy today to participate in the Euro-Mediterranean Investment Forum, according to a ministry statement. Maait is expected to meet with Italian Finance Minister Giovanni Tria and Intesa Sanpaolo Chairman Gian Maria Gros-Pietro, among other officials, on the sidelines of the forum.

Keep your eyes on these news triggers over the coming days:

  • Foreign reserves: The CBE is expected to release net foreign reserve figures for June today.
  • Inflation: Monthly inflation figures are due out next week.
  • Interest rate day: The central bank’s Monetary Policy Committee is due to meet next Thursday, 11 July, to review interest rates.

Afcon’s round of 16 kicks off tomorrow with Morocco playing against Benin at 6 pm CLT at Al Salam Stadium, followed by Uganda vs. Senegal at 9 pm.

Egypt, meanwhile, will be up against South Africa on Saturday at 9 pm CLT at Cairo International Stadium. By the looks of it, the winners will take on either Nigeria or Cameroon in the quarter finals. You can find the full round of 16 fixtures here.

Another sign The Donald is pushing to control US monetary policy? US President Donald Trump is planning to nominate two new Fed governors likely sharing his dovish monetary policy beliefs, according to the Associated Press. Trump said in a tweet on Tuesday that he plans to send Judy Shelton and Christopher Waller’s names to the Senate. Shelton, who has recently made clear her leaning toward accommodative policy, and Waller, whose stance is likely accommodative but is much less clear, are Donald’s latest attempts to “bring two dovish votes” to the Fed.

Trump has been outwardly critical of the Fed’s neutral and restrictive policies as of late, arguing that Jerome Powell’s four rate hikes last year and reluctance to ease this year are stifling economic growth and depressing stocks.

Why have assets risen across the board so far in 2019? Market addiction to easy money, markets sage Mohamed El Erian suggests in a Bloomberg opinion piece. The signals of further stimulus put out by the world’s key central banks have resulted in an abnormal rally among asset classes on opposite poles of the risk spectrum: Long-term US treasuries and high-yielding emerging-market bonds, gold, and bitcoin. Despite the ominous backdrop of intensifying trade conflict, global slowdown and geopolitical tensions, assets across the board have risen in the hope of fresh stimulus measures.

This raises deeper questions about the strength of the economic fundamentals. Optimists point to the US labor market and the growing impact of technology on supply to suggest that the economy has finally ended its reliance on central bank liquidity, and has begun to experience genuine growth. However, a long list of uncertainties is accompanying the ongoing rally, signifying that the economic and corporate fundamentals are not as stable as the optimists would have us believe. “Such belief is yet to be warranted by developments on the ground,” El Erian writes. “Prospects remain not just fluid but also unusually uncertain.”

In global miscellany this morning:

  • Hassan Rouhani has threatened to increase Iran’s enrichment of uranium to “any amount that we want” starting Sunday, according to the Associated Press. Tehran had intentionally breached the 2015 nuclear agreement earlier this week by exceeding the agreed-upon limit of enriched uranium to persuade the EU to offer a way around US oil sanctions.
  • An air strike on a Tripoli migrant detention center killed 40 and injured at least 80 on Tuesday evening. Libyan National Army chief Gen. Khalifa Haftar has accused government forces of the attack, the BBC reports.
  • White House advisor Jared Kushner’s latest attempt to bring the Palestinians to the negotiating table for the US’ Middle East peace plan: Telling reporters that Donald Trump is “very fond” of Palestinian Authority President Mahmoud Abbas, who doesn’t seem to reciprocate, according to Reuters.

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