The GBP to ILS exchange rate has faced significant pressure recently, driven by a combination of weaker UK economic data and shifting expectations regarding interest rate policies from both the Bank of England (BoE) and the Bank of Israel (BoI). As of the latest updates, the GBP is trading at approximately 4.3987 ILS, marking 7-day lows and reflecting a 2.3% decrease from its 3-month average of 4.5022 ILS. The exchange rate has fluctuated within a relatively stable range of 6.4%, from 4.3399 to 4.6157.
Recent economic indicators reveal that UK inflation held steady at 3.8% for September, which was lower than the anticipated rise to 4%. This has heightened expectations of a possible interest rate cut by the BoE in December as inflation appears to have peaked. Coupled with declines in business optimism and industrial orders, these factors are likely to exert further downward pressure on the British Pound.
On the Israeli side, the ILS has shown strength, supported by a decline in the annual inflation rate to 2.5%, which falls within the government’s target range. Analysts suggest that this cooling inflation may prompt the BoI to consider interest rate cuts, reinforcing the shekel's solid position. The ILS has appreciated significantly, aided by reduced geopolitical tensions and improved investor sentiment, particularly as it gained approximately 9.3% against the US dollar in the second quarter.
Forecasters are closely monitoring the upcoming UK budget set for November 26, which could include tax increases and spending cuts, potentially affecting the GBP. In contrast, UBS has recently revised forecasts for the ILS, predicting further strengthening due to improved economic fundamentals and decreased geopolitical risk premiums.
As these factors unfold, the outlook for the GBP to ILS exchange rate remains cautious, with potential for continued volatility driven by economic data releases and monetary policy adjustments from both central banks.
