USD/ILS Outlook: Bearish, as the rate is well below its recent average and near recent lows, pressured by factors affecting both currencies.
Key drivers:
- Rate gap: The Federal Reserve plans to cut rates with one to two reductions expected, while the Bank of Israel recently lowered its benchmark rate, making the shekel more appealing.
- Risk/commodities: Ongoing geopolitical tensions, including U.S. military actions, create uncertainty that may hurt the dollar.
- One macro factor: The Bank of Israel reported a strong GDP growth forecast for 2026 as military tensions ease, boosting the shekel's outlook.
Range: The USD/ILS is likely to drift within the recent range, as it remains near historical lows.
What could change it:
- Upside risk: A sudden increase in U.S. inflation could lead to a revision of Fed rate cut expectations.
- Downside risk: Continued strengthening of the shekel driven by improving economic indicators could further weaken the USD.