Bias: Bearish-to-range-bound, EUR/ILS sits below its 90-day average and in the lower half of the three-month range.
Key drivers:
• Rate gap: ECB policy stance remains cautious while the Bank of Israel cut rates, narrowing the gap and supporting the shekel, with markets watching for follow-on moves.
• Risk/commodities: Oil prices are elevated and volatile, which tends to weigh on the euro via energy costs more than on the shekel, adding to volatility in the pair and keeping hedgers alert.
• Macro factor: Eurozone inflation is easing toward target, reinforcing the ECB's cautious stance and biasing policy expectations, while growth data in major economies remains mixed.
Range: The pair is likely to drift toward the lower end of the three-month range, with a higher chance of testing the floor but staying within the established band as liquidity remains cautious and flows skew to safe assets.
What could change it:
• Upside risk: The ECB signals earlier rate normalization on stronger inflation data.
• Downside risk: Additional Bank of Israel easing or a renewed rally in the shekel.
