Although Egypt’s constitutional crisis has eased, the currency is now presenting a fresh cause for concern. Our central view remains that Egypt will secure an IMF deal which, combined with a return of private capital inflows and official aid, should ensure that a full-blown currency crisis is avoided. For now, we think that the pound will undergo an “orderly” devaluation to around 7.5/$. But with numerous issues to iron out in the negotiations, particularly over subsidy reforms, this outcome is by no means certain.
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