EUR/ILS Outlook:
The EUR/ILS exchange rate is currently below its 90-day average and near recent lows, indicating a bearish outlook. Recent factors, including a rate cut by the Bank of Israel, have contributed to this weakness.
Key drivers:
• Rate gap: The European Central Bank is maintaining an accommodative stance, while the Bank of Israel has recently cut interest rates to support growth, leading to a widening differential between the two currencies.
• Risk/commodities: Oil prices have surged above recent averages, which typically boosts the euro due to its influence on inflation and economic performance in the Eurozone.
• One macro factor: The Eurozone's consumer confidence remains sluggish despite slight improvements, limiting the euro's potential strength.
Range:
The EUR/ILS is likely to drift within a stable range, reflecting the recent fluctuations but remaining constrained below its average.
What could change it:
• Upside risk: A stronger-than-expected recovery in Eurozone economic indicators could revive the euro.
• Downside risk: Further interest rate cuts by the Bank of Israel or negative geopolitical developments could weaken the shekel further against the euro.
