GBP/ILS Outlook:
The GBP/ILS is likely to decrease as it trades near 90-day lows and is significantly below its recent average. Recent geopolitical tensions and rising energy prices create uncertainty that pressures the pound.
Key drivers:
• Rate gap: The Bank of England is under pressure due to economic growth concerns, while the Bank of Israel recently cut rates, supporting a stronger shekel.
• Risk/commodities: Rising oil prices negatively impact the UK economy, reducing the attractiveness of GBP relative to the ILS.
• One macro factor: Geopolitical tensions, particularly in the region, are likely to weigh on GBP as investors seek safety in other currencies.
Range:
Expect GBP/ILS to drift toward the lower end of its recent range as uncertainty persists.
What could change it:
• Upside risk: A surprise recovery in UK economic data could boost the GBP.
• Downside risk: Further escalation of geopolitical tensions may strengthen the ILS further against the GBP.
