The British pound (GBP) has recently shown signs of weakness against the Israeli new shekel (ILS) due to disappointing UK GDP figures and heightened concerns over stagflation in the UK economy. A contraction of 0.1% in October’s GDP has reinforced expectations for an impending interest rate cut from the Bank of England (BoE), which analysts predict may occur as early as mid-December. As a result, Sterling has closed below its three-month average at an exchange rate of 4.2990 ILS, 1.4% lower than the average of 4.3589 ILS.
Additionally, UK fund managers are reportedly increasing their foreign exchange hedges due to growing volatility in the GBP, with many anticipating that any further rate cuts from the BoE could put downward pressure on the pound. This sentiment is echoed in the currency markets, where the GBP has already weakened against the Euro in light of anticipated central bank actions, fostering a bearish outlook for Sterling in the near term.
Meanwhile, the ILS has been supported by a notable decline in inflation rates, now at 2.5%, and a strengthening sentiment towards Israel's economic fundamentals. Analysts point out that a decline in geopolitical risk premiums due to recent ceasefires has provided further backing for the shekel. With forecasts indicating potential interest rate cuts from the Bank of Israel in response to cooling inflation, market participants are positioning the ILS favorably against the GBP.
The volatility seen in recent GBP/ILS trading, which has fluctuated in an 8.4% range from 4.2026 to 4.5563, suggests that both currencies are reacting dynamically to economic data releases and geopolitical developments. Market experts recommend monitoring upcoming economic indicators from both the UK and Israel, as they will likely influence future exchange rates and trading strategies.
