It was a quiet week with the shilling trading within a narrow range between the 3680/3690 levels as residual month-end flows filtered into the market but were comfortably balanced with pockets of Corporate demand. Activity is expected to pick up in the coming weeks as schools reopen and business activity gains momentum. The unit is likely to trade within the 3650-3750 trading range in the short term.
Money Markets were fairly liquid this week in comparison to the previous week with overnight yields trading between the 11.50% – 12.50% levels. Bank of Uganda held a Treasury Bill auction and yields in the 91-day, 182-day and 364-day tenors cleared at averages of 10.384%,10.461% and 12.502% respectively.
On Wednesday February 8, 2023, Bank Of Uganda will hold a Bond Switch auction for the bond maturing on the 13th of April 2023.
The Kenyan market continues to see more demand than dollar supply which continues to keep the unit weak. This trend is likely to continue with the unit trading between the 124.00 – 132.00 trading range.
On Wednesday, the Fed raised its benchmark rate by 0.25% as per the market expectations. PMI printed at 47.4 versus an expectation of 48. A continued rise in employment numbers further strengthened the case for the dovish outlook by the Fed and a slowdown in the magnitude of rate hikes in the coming months.
The Euro weakened on Thursday as the European Central Bank raised its benchmark rate by 0.50% and also indicated further tightening cycles in the coming months. The unit reached a 10-month intraday high of $1.1033 (Shs 4103), and ended the session weaker at $1.0910 (Shs 4057)having touched an intraday low of $1.0883 (Shs 4047).
The Pound lost ground on Thursday as the Bank of England hiked its benchmark rate by 0.50%. The Pound touched lows of $1.2219 (Shs 4544) and closed the day at $1.2223 (Shs 4546).
A build-up in U.S. crude oil inventories led to a marginal drop in crude oil prices during the week. Brent Crude traded at $81.88 (Shs 304,550) a barrel and west Texas Intermediate at $75.57 (Shs 281,080) a barrel.
Gold traded at $1912.98 (Shs 7,115,267) an ounce.