USD/ILS Outlook:
The USD/ILS rate is likely to decrease, trading below its recent average and near recent lows. Pressures from both the geopolitical landscape and Israeli central bank policy favor a strengthening shekel.
Key drivers:
- Rate gap: The Federal Reserve's interest rate policy remains tighter than the Bank of Israel's recent rate cut, which weakens the USD comparatively.
- Risk/commodities: Rising safe-haven demand for the USD amid potential military actions in the region contrasts with growing investor confidence in the ILS.
- One macro factor: Recent improvements in Israel’s economy have bolstered the shekel, following stable inflation and a steady recovery post-ceasefire.
Range:
Expect the USD/ILS to drift within its recent range, potentially testing lower extremes as the shekel's strength persists.
What could change it:
- Upside risk: A surprising rebound in US economic growth could renew demand for the USD.
- Downside risk: Continued gains for the shekel, driven by stable geopolitical conditions and economic growth, could push the rate lower.
