Macro Support for EGP (And Its Limits)

Research evidence excerpt

Macro Support for EGP (And Its Limits)

Economics Research

25 June 2026 | 3:12PM BST

CEEMEA ECONOMICS ANALYST

n The EGP has been a major beneficiary of the ceasefire extension between the Farouk Soussa

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United States and Iran, which promises an immediate end to hostilities in the Gulf farouk.soussa@gs.com

Goldman Sachs International

and a resumption of flows through the Strait of Hormuz, rallying >4% against the

US Dollar since 14 June. Our FX strategists are forecasting further appreciation

from here (49/48/46 in 3/6/12 months). In this CEEMEA Economics Analyst we

flesh out some of the key macro supports for EGP in the medium term (next 3-4

years), as well as some of the headwinds facing the currency in the near term

(next 6-12 months).

n Among the key support factors are (i) a benign medium-term external outlook,

(ii) robust external buffers, (iii) a still meaningful real exchange rate valuation

buffer, and (iv) stable domestic confidence.

n While we believe the above factors represent a strong bedrock of support for

EGP and reinforce our FX strategists’ forecast of further EGP appreciation, we

also highlight some potential headwinds to EGP in the near term. Aside from the

possibility of continued geopolitical uncertainties and the impact this would have

on global energy prices, we note (i) a potential decline in near-term financing due

to a slowdown in portfolio inflows (positioning in the local market is already back

to pre-war highs) and the termination of the current IMF programme at the end

of this year, (ii) a persistently high inflation differential, which may erode the

REER valuation buffer, and (iii) reduced attractiveness of the local market carry

trade as we expect the policy easing cycle to resume next year.