EUR/ILS Outlook:
Bearish, as the rate is currently below its recent average and close to recent lows.
Key drivers:
• Rate gap: The European Central Bank has maintained its interest rate, unlike Israel's surprising rate cut, favoring a stronger shekel over the euro.
• Risk/commodities: A significant rise in oil prices could put upward pressure on inflation in the Eurozone, potentially affecting the euro negatively against the shekel.
• One macro factor: The recent decline in Eurozone inflation below the ECB's target raises concerns about future rate cuts, further weakening the euro.
Range:
Expect EUR/ILS to drift within its recent range, as it remains below the average and lacks strong upward momentum.
What could change it:
• Upside risk: A stabilization in Eurozone economic conditions could prompt stronger euro demand if inflation reverses.
• Downside risk: Continued cuts by the Bank of Israel could strengthen the shekel further, increasing downward pressure on the euro.
