USD/ILS Outlook: Bearish, consistent with the rate trading below its recent average and near recent lows.
Key drivers:
• Rate gap: The Federal Reserve is likely to implement additional rate cuts, while the Bank of Israel recently reduced interest rates, contributing to weakness in USD against ILS.
• Risk/commodities: Geopolitical tensions, particularly regarding US military actions, have heightened market volatility, adversely affecting the USD.
• One macro factor: The Israeli economy is expected to grow significantly, with a GDP forecast of 5.2% in 2026, boosting confidence in the shekel.
Range: USD/ILS is likely to drift lower within its recent 3-month range, reflecting the bearish outlook.
What could change it:
• Upside risk: A surprising stabilization in US economic indicators could strengthen the USD.
• Downside risk: Further geopolitical escalations or additional US jobless claims increases could weigh heavily on the USD.
