Good morning, friends. The news cycle is beginning to pick up. We have econ, M&A, and diplo news for you this morning.

THE BIG STORY HERE AT HOME-

Twelve-month non-deliverable forwards have dipped and stabilized yesterday at c. EGP 57.00 to the greenback — down from a high of nearly 67 just a few days ago, Bloomberg reports, citing market data. The EGP has strengthened on the parallel market as well after falling last week to >70 to the greenback, underscoring our view that the plunge was fuelled by speculation, not fundamentals.

The greenback was changing hands at EGP 48-56 yesterday, according to domestic media reports.

MEANWHILE- Oxford Economics sees the EGP falling to 55-60 to the USD in banks by the end of the year if the central bank moves to a flexible exchange rate regime, it said in a report picked up by Zawya. Meanwhile, Capital Economics sees the EGP falling further to sit at 65 against the greenback, giving color to a November report where it suggested that policymakers need to loosen their grip on the exchange rate soon to maintain the balance of payments and attract fresh capital inflows.

Everyone is singing the same tune: Last week, S&P Global Ratings said it is expecting authorities to devalue the EGP to half its current official value to unlock the remainder of the IMF package. Morgan Stanley also said it sees a devalued EGP is our future, without providing much details.

Higher inflation on the way: Oxford Economics expects annual headline inflation to peak in 4Q 2024 at 40-45%. Inflation dropped for a third consecutive month in December to 33.7%, but Standard Chartered expects it to rise again in January following the government’s recent price hikes — including those imposed on mobile bills and electricity.

AND- Decision to slash public spending and scrap gov’t tax breaks is now official: Last week’s cabinet decisions to cut allocations for public investment for the current fiscal year and to scrap tax exemptions granted to state entities and public-sector companies and projects are now official, according to the Official Gazette.

ALSO- Blinken is in the region:US Secretary of State Antony Blinken landed in Saudi Arabia yesterday, kicking off a four-day regional trip.

On the agenda yesterday in Riyadh: An “enduring end to the crisis in Gaza,” “building a more integrated and prosperous region and reaffirm[ing] the strategic partnership between the United States and Saudi Arabia” (read: recognition of Israel in return for an expanded US defense pact). The two also discussed the situation in the Red Sea, a readout from the State Department said.

He’ll be in Cairo soon: He is scheduled to visit Egypt, Qatar, Israel, and the West Bank until Thursday, 8 February, as part of his fifth trip to the region since war broke in Gaza in October. We think it likely he’ll be here today — that he’s following the literal order in which countries were listed in the announcement of the tour, which read “Saudi Arabia, Egypt, Qatar, Israel, and the West Bank.”

The key message to the region: Delivering “a message directly to countries in the region that the United States does not want to see the conflict escalated and will not escalate the conflict," a senior US official told reporters.

SIGN OF THE TIMES-

McDonald’s 4Q revenues fall short of estimates amid MidEast boycotts: McDonald’s missed Wall Street’s estimates for quarterly sales growth for the first time in almost four years, with the company saying that the impact of the ongoing war in Gaza has undermined sales, according to its latest earnings release (pdf). The company’s sales in its international developmental licensed markets segment edged up just 0.7% during the quarter, compared to estimates of 5.5%, according to LSEG data cited by Reuters.

ALSO- The fast food giant’s global same-store sales rose 3.4% in 4Q, well below estimates of 4.9%, marking the slowest growth for the segment in nearly three years.

THE EGYPT ANGLE- McDonald’s is one of several Western goods and brands that have been subject to boycotts in the Middle East due to its perceived support for Israel. McDonald's Egypt has been trying to get in Egyptian’s good grace — reiterating the fact that it is 100% Egyptian-owned and announcing an EGP 20 mn donation to those in need in Gaza. The fast food chain has also announced a long list of offers and price reductions in efforts to reel in boycotters.

HAPPENING TODAY-

It’s your last chance to catch the Cairo Book Fair: This year’s Cairo InternationalBook Fair will close its doors later today. If you haven’t gotten the chance to visit it, you can check it out between 10am and 8pm. The 2024 edition of the fair is the biggest to date, with some 4.5 min visitors having passed through its gates.

CIRCLE YOUR CALENDAR-

Aviation conference lands in Cairo: Egypt will host this year’s ACI Africa RegionalConference — under the theme Airports: Levers of Socioeconomic and Sustainable Growth — bringing together industry leaders, experts, and innovators. The event will be held from 21 February to 1 March at the Alamera Hall Air Forces House Center and Le Méridien, Cairo Airport. Register here to attend the conference.

Check out our full calendar on the web for a comprehensive listing of upcoming news events, national holidays and news triggers.

THE BIG STORY ABROAD-

One story dominates the front pages of the global press this morning: The UK’s King Charles III has been diagnosed with “a form of cancer” at the age of 75, a year and a half after coming to the throne, according to a statement released by Buckingham Palace yesterday. The form of cancer was not specified. Charles will continue to work behind closed doors, but will be stopping public activities while he seeks treatment.

The story got plenty of ink in the int’l papers:BBC | Associated Press | NBC News | Reuters.

PSA- Is your spawn about to apply to college abroad? We have two stories you’ll want to know about this morning:

• Top US colleges are looking to once again require SATs and ACTs for kids seeking admission. Many colleges are making decisions now about their fall 2025 intake — and those backing standardized testing just got a boost from Dartmouth, which is bringing back the tests. (Financial Times | NPR | New York Times)
• Canada has extended its ban on foreign ownership of real estate by another two years as part of a bid to ease a housing shortage. The Great White North has also imposed a cap on the number of student visas it will issue.

AND IN TECH NEWS-Microsoft is trying its hand at AI-aided journalism: Microsoft has reportedly handed media startup Semafor a “substantial” amount of money to develop a breaking news channel — dubbed Signals — that will use AI to help journalists write daily news and analysis, the Financial Times wrote.

IN MEMORIAM- Richard Debs, the longtime Middle East hand of Morgan Stanley who led a boardroom coup in 2005, has died at 93. Readers of a certain age will recall that Debs, a Fulbright scholar in Egypt in the 1950s, led Morgan Stanley’s push into Cairo and Riyadh starting in the late 1970s. After retirement, was advisory director and chairman of Morgan Stanley Saudi Arabia and chairman (later emeritus) of the American University in Beirut. See obits in the New York Times ’s Legacy and Bloomberg.

*** It’s Going Green day — your weekly briefing of all things green in Egypt: Enterprise’s green economy vertical focuses each Tuesday on the business of renewable energy and sustainable practices in Egypt, everything from solar and wind energy through to water, waste management, sustainable building practices and how you can make your business greener, whatever the sector.

In today’s issue: We take a look at how fertilizer, cement, steel, and aluminum exporters need to prepare for the EU’s Carbon Border Adjustment Mechanism.