CAD/ILS Outlook:
The CAD/ILS exchange rate is likely to decrease as it currently trades 1.0% below its 3-month average and is near recent lows, pressured by mixed economic data and geopolitical tensions.
Key drivers:
• Rate gap: The Bank of Canada may maintain its current stance, while the Bank of Israel recently cut interest rates, reducing the yield appeal of the ILS.
• Risk/commodities: The CAD benefits from strong oil prices, which are significantly above average, supporting the Canadian economy but may not sufficiently counteract other negative factors for the currency.
• Economic forecasts: The Israeli economy shows signs of recovery with expected GDP growth, further lending strength to the ILS.
Range:
The CAD/ILS rate is likely to drift within its recent range, facing downward pressure but not testing extremes due to concurrent moderate oil support.
What could change it:
• Upside risk: A sharp increase in oil prices could further bolster the CAD, leading to a stronger exchange rate.
• Downside risk: Continued geopolitical instability could lead to elevated USD demand, further weakening the CAD versus the ILS.
