Bias: bearish-to-range-bound, as EUR/ILS trades below its 90-day average and sits in the lower half of the 3-month range, with limited upside unless data surprises.
Key drivers:
- Rate gap: The ECB policy remains neutral with rates relatively high, while the Bank of Israel cut rates, helping the shekel and putting downward pressure on EUR/ILS.
- Oil/commodities: Oil stays above its average with volatility, weighing on the euro on energy-cost concerns and supporting the shekel.
- Macro factor: Eurozone inflation is easing and growth remains modest, allowing the ECB to maintain neutral policy for now.
Range: EUR/ILS is likely to drift within the 3-month band, with modest moves toward the lower end if euro-area data stays soft and Israel's momentum remains firm.
What could change it:
- Upside risk: An unexpected euro-area inflation uptick or clearer ECB guidance signaling tightening could lift the euro.
- Downside risk: A further BoI rate cut or stronger Israeli growth could push EUR/ILS lower as the shekel strengthens.
