A persistent lack of dollar demand continued to boost the performance of the shilling against the dollar on Tuesday.

Subdued market activity constrains Shilling’s movement against dollar

Thursday’s trading session saw the recent theme of subdued market activity continue, which constrained the local unit’s movement against the dollar to within a narrow trading band.

The USD/UGX currency pair oscillated between the 3685- 3705 ranges as dwindling dollar supply from various counters balanced out with corporate foreign currency demand.

We see limited market activity in the interim, and expect the Shilling to hold within recent trading ranges.

U.S. dollar stands at multi-week tops

The U.S. dollar stood at multi-week tops amid a tempered expectation of a 50bps rate cut by the Fed at its upcoming meeting after upbeat US durable goods, wholesale sales and jobless claims data.

New orders for key U.S.-made capital goods surged 1.9% in June, while weekly jobless claims declined to 206,000. The Euro bounced off two month lows after the European Central bank failed to deliver a rate cut, while ECB President Mario Draghi offered optimism on the euro zone economy.

Investors had priced in more than a 50% chance of an interest rate cut prior to Thursday’s ECB meeting. After the ECB kept rates unchanged, the euro recovered from lows. The Pound took a trip to the downside after touching highs of 1.2515 levels on account of hard Brexit fears.

The Cable sell-off could be attributed to Brexit concerns amid the UK Cabinet overhaul by the new UK PM Boris Johnson, with most senior positions filled in by ardent Brexiteers, who back the case for the UK leaving the European Union (EU) on October 31st with or without a Brexit deal.