The exchange rate forecast for GBP to ILS has been influenced by mounting bearish sentiment surrounding the British Pound, primarily driven by concerns regarding the UK's fiscal situation and potential interest rate cuts by the Bank of England (BoE). Recent commentary highlights that the GBP suffered due to a decline in UK inflation, leading to speculation about an upcoming rate cut, which could debilitate the currency's attractiveness to investors.
Investor sentiment has notably shifted negatively as the UK budget approaches on November 26, with worries regarding possible tax hikes and anticipated interest rate reductions. Analysts indicate that the pound has reached multi-month lows against major currencies, underlining a shift in market outlook. Current trading around 4.2779 for GBP to ILS indicates a 3.2% decline from its three-month average of 4.4204 and has oscillated significantly within a 9.3% range—from a low of 4.2026 to a high of 4.5941—reflecting increased volatility.
Conversely, the Israeli New Shekel is poised for strength, bolstered by a decline in inflation to 2.5%, now comfortably within the government’s target range. This drop in inflation may prompt the Bank of Israel to consider interest rate cuts, enhancing the shekel's appeal. The shekel has appreciated significantly against the dollar, with improved investor sentiment and reduced geopolitical risks contributing to its recent strengthening. Analysts from UBS have revised their projections for the USD/ILS exchange rate downwards, forecasting further appreciation of the shekel, which may pressure the GBP to ILS rate even lower.
Overall, the convergence of a weakening pound and a potentially strengthening shekel underscores significant challenges for GBP in pairing with ILS in the coming weeks. Market participants are recommended to monitor fiscal developments in the UK closely, along with economic indicators from Israel, as these will play critical roles in the currency's performance.
