The Ugandan shilling demonstrated relative strength in the first week of the month, opening between Shs 3,675 and Shs 3,685 and strengthening to Shs 3,665 / 3,675 by Friday morning. The improvement was primarily driven by portfolio flows, commodity inflows, and remittances, which outweighed corporate demand.
The local currency is expected to maintain its upward trajectory, with projections placing it within the Shs 3,650 – Shs 3,700 range in the near future.
Money Market Trends
According to Richard Nsubuga, Trader at CIB Markets, Absa Bank Uganda, money markets experienced some tightness, with overnight trades averaging 11.15%, matching the rate for one-week trades.
Meanwhile, the Kenyan shilling faced reduced pressure over the week due to declining corporate demand. By Friday, it was trading at KES 129.00 / 129.25 against the U.S. dollar, with expectations to remain within the KES 128.80 – KES 129.80 range.
Global Currency and Economic Developments
He says that he U.S. dollar index remained stable around 104 on Friday after a declining week. Market sentiment was impacted by rising trade tensions, which raised concerns about potential economic repercussions, particularly for U.S. firms reliant on free trade.
“In Europe, the European Central Bank (ECB) signaled a possible slowdown in interest rate cuts after reducing its benchmark rate by 0.25 percentage points to 2.5% on Thursday. This was the sixth cut since June 2024, when rates stood at a record 4%. The euro strengthened during the week as investors anticipated increased public spending across Germany and other European nations, particularly for defense initiatives,” Nsubuga stated.
Commodity Market Outlook
In the commodities market, WTI crude futures traded around $66 per barrel on Friday, marking their worst week since October 2024. The decline was driven by concerns over oversupply from Kazakhstan and speculation about sanctions relief on Russia due to President Vladimir Putin’s interest in a Ukraine peace deal, which could lead to increased gas exports.
