On December 3, 2023, the global dollar exchange market indices reported a decline in the US dollar, landing approximately at 103.125, marking a decrease of about 0.29%. Despite this downturn, the dollar's exchange rate against the Egyptian pound remained stable in various banks in the domestic Egyptian market. The opening rates in Cairo Bank, the National Bank of Egypt, and the CIB Bank were 30.85 for buying and 30.95 for selling. Similarly, the Central Bank of Egypt reported an exchange rate of 30.83 for buying and 30.96 for selling.
The Shrinking US Money Supply
The shrinkage in the US money supply marks the first of its kind since the Great Depression, triggering concerns about potential repercussions on the stock market. With the M2 money supply reporting a decline of 4.51% since its peak in July 2022, apprehensions about the impact on discretionary spending and the resultant slower economic growth are mounting. The precedent set by significant downturns in M2 money supply, often leading to economic recessions and poor stock performance, fuels these concerns. The tightening of lending standards, reflected in the decline of commercial bank credit, could further stymie economic activity.
Gold Reaches Record High
As the dollar and Treasury yields fall in light of weak US economic data, gold reached a record high, closing at $2,070.10, just $10 short of the record high achieved in May. Factors such as the decline in US manufacturing activity, changes in global trade dynamics, and the softening dollar have contributed to the surge in gold prices. The pending rate cuts from the Federal Reserve and potentially the European Central Bank are also driving up gold prices. These factors, coupled with stagnant US manufacturing activity and missing expectations on the S&P Global manufacturing purchasing managers index, have led to a bullish sentiment for gold as a safe-haven asset amidst economic uncertainties.
The Dollar's Decline
The dollar is experiencing a decline against its major rivals, reaching a three-month low as investors sell off the dollar and US treasury bonds. Investor skepticism surrounding the depth of OPEC+ supply cuts and concerns about sluggish global manufacturing activity have contributed to the fall in the dollar index and 10-year treasury yields. Federal Reserve Chair Jerome Powell's remarks on the risks associated with hiking interest rates and the balanced risks further affect the lower interest-rate outlook. Investors are now awaiting crucial US data on third-quarter GDP growth to anticipate the likely path for policies.
Gulf Stock Markets Respond to Oil Price Fall
Most Gulf stock markets ended lower as a response to the slump in oil prices on Friday. The exception was the Saudi index, which closed higher thanks to the rise in oil giant Saudi Aramco and Arabian Pipes Co. Federal Reserve Chair Jerome Powell's remarks on the risks of hiking interest rates have also influenced monetary policy in the GCC, as most regional currencies are pegged to the US dollar. The lower interest-rate outlook and the reversal of the dollar's appreciation against global currencies have eased inflation and borrowing constraints globally, particularly for emerging market economies.