Daily Outlook

Following on from the policy announcements in the US and Japan last week, the markets will continue to mull their impact. So far the verdict on the BOJ’s ‘yield curve control’ policy has been relatively cautious, but we would be surprised if the new steps will yield positive results any time soon. In the US, the focus will be on the follow-up comments from Fed officials to the Fed’s decision to leave interest rates on hold, with 12 FOMC members due to speak this week. All eyes will also be on the first debate of the US Presidential election campaign tonight between Donald Trump and Hilary Clinton, and the OPEC summit in Algiers will also be in the spotlight this week.

Bank deposits in the UAE declined for the third month running in August, as GREs withdrew AED 6.7bn from banks last month and non-resident deposits also declined. These outflows were partially offset by higher government (0.5% m/m) and private sector (0.1% m/m) deposits. Total bank deposits fell AED 7.5bn (-0.5% m/m) in August, with annual growth slowing to 3.3% from 3.5% y/y in July. Loan growth also slowed to 5.8% y/y from 6.2% in July. The loan to deposit ratio increased to 104.7% in August, the highest reading since July 2012. Meanwhile in Saudi Arabia SAMA has announced that it will inject SAR20bn into its banks in the form of time deposits as a means of improving liquidity in the financial system. SAMA also said that it will introduce 7-day and 28-day repurchase agreements as a ‘part of its supportive monetary policy’.

At its latest meeting on September 22, the Central Bank of Egypt (CBE) voted to keep its main interest rates unchanged, with the overnight deposit and lending rates sitting at 11.75% and 12.75% respectively. The decision was unexpected, with a Reuters’ poll ahead of the vote showing all 12 contributors expecting rates to be hiked by varying degrees.