The USD to ILS exchange rate has recently been influenced by a combination of factors impacting both the US dollar and the Israeli shekel. As per market analysts, the US dollar continues to weaken amid strong expectations of aggressive Federal Reserve rate cuts, which are anticipated to begin as early as March 2026. Despite some positive economic indicators, such as unexpectedly low jobless claims, the overall outlook for the dollar remains bearish largely due to mixed economic data and a decelerating growth trajectory.
The US Dollar Index (DXY) has seen a noticeable pullback from its recent highs, as traders adjust to a shift from inflation-fighting to an expected easing cycle. This transition, combined with improving risk sentiment and faltering safe-haven demand for the dollar, has added downward pressure on the USD. Additionally, concerns surrounding the US fiscal deficit are once again becoming a focal point, potentially exerting long-term bearish influences on the dollar.
Conversely, the Israeli shekel is appreciating, bolstered by a decline in inflation to 2.5%—now comfortably within the central bank's target range. Analysts note that this allows the Bank of Israel to consider potential rate cuts, which could further support the shekel. Furthermore, a recent ceasefire in Gaza has led to a decrease in Israel's geopolitical risk premium, enabling the shekel to gain approximately 9.3% against the dollar within a few months.
Breaking down the recent price data shows that the USD to ILS is currently at 14-day lows near 3.2342, which is about 1.6% below its three-month average of 3.2876. The pair has remained relatively stable, trading within a tight 4.9% range from 3.2003 to 3.3576.
Looking ahead, various market analysts suggest that if the Fed adopts a more dovish stance, while the Bank of Israel navigates a favorable economic backdrop, further strengthening of the shekel against the dollar may be anticipated. Factors to monitor include upcoming US economic data releases, which could alter rate cut expectations and influence the USD, as well as any developments regarding geopolitical risks that may affect forex sentiment.
