Why Uganda Shilling upside ride on improved sentiment following World Bank $300m funding will be short-lived

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The local currency remained marginally firm against limited market activity on both demand and supply counters trading in the range of 3720/30. In the shilling interbank money market liquidity remained adequate with overnight funds quoted at 3% while one week funds at 4.3%.

In other notable economic news, inflation for the month of June picked up to 4.9% ,a 16 month high largely driven by cost of services, particularly transportation costs, a knock on effect from the Covid-19 restrictions.



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The week also saw the country’s sovereign rating revised downwards form B+ stable to negative outlook over concerns that future economic prospects have weakened.

In the fixed income markets, a Treasury bill auction with 235 billion on offer was well bid. Yields marginally edged up to print at 8.683%, 10.249% and 12.000% respectively. Amount on offer was larger than previous auctions.

The currencies of the East African Community partner states traded stable with the Kenya shilling lifted up mainly by horticultural flows to trade at 106/45/65.
While the Tanzania was supported by the business resumption and traded at 2310/20



The US dollar maintained its safe haven dominance as the resurgence of Covid-19 cases in the US that discouraged investors from taking excessive risk, while at Wall Street, activity was upbeat despite the surge of Covid infections.
Stocks rallied with S&P index finishing higher in June marking its biggest quarterly percentage gain since 1998. In Europe, both the Euro and the Pound advanced, boosted by the news surrounding the development of a potential corona vaccine.



Forecast for shilling

Stephen Kaboyo, the Alpha Capital Markets boss ‘’In the short term, the shilling will ride on improved sentiment following the World Bank funding announcement of 300 million dollars, however the UGX upside will be curtailed by the Covid developments in the US that supports the dollar against riskier assets.’’

Alpha Capital Forex Bureau: For competitive Forex Rates VISIT Plot 12 KAMPALA ROAD-CHAM TOWERS SUITE 43: call: 0414-580619, 0392-612648

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