KEY THEMES
U.S. equities surged notably on Tuesday, as the intensifying tension regarding Ukraine-Russia took a breather yesterday. This comes in light of Russia saying that it had withdrawn some of its troops near the Ukraine border. The impact of such announcement was a sentiment improving for risk assets, where Asian and European equities responded favorably. Meanwhile, Brent oil prices retreated, as easing geopolitical tension weaken the argument for a substantial supply destruction.
Here at home, the Central Bank of Egypt's (CBE) deputy governor Ramy Abonaga hosted a conference call yesterday to review recent macroeconomic trends and key projections. Among the important highlights from yesterday’s call are:
o NFA situation at commercial banks: the banking sector's foreign currency liquidity ratio is healthy and the government's current shortfall in the NFA position is not unprecedented, Abonaga said, explaining the country encountered similar circumstances in 2016 and 2018. Throughout these periods, commercial banks were able to weather the storm without experiencing a disruption in their FX liquidity. In addition, the current situation reflects the banks’ active attempts to secure their foreign currency needs at favorable conditions. Consequently, banks increase their liability to offset the potential negative effect of a faster-than-expected global tightening cycle.
o Import regulation: The recently announced import regulation requirements are consistent with the framework for import operation governance and the mandatory pre-registration system for shipments beginning in March.
o Monetary policy: The CBE's policy rate decision is data-dependent, and the current monetary policy setting is on track to meet the inflation objective of 7% (±2 %) on average in Q4 2022 as well as achieve medium-term price stability. The CBE keeps a close eye on all economic events and will not hesitate to use all available measures to carry out its mandate of price stability.
That said, we will be sending a MACROView note, summarizing the event of the conference call.