The USD/ILS exchange rate has recently been influenced by a combination of factors related to the US dollar's weakening and the Israeli new shekel's strengthening. The US dollar has faced downward pressure following dovish remarks from Federal Reserve Chair Jerome Powell indicating potential future rate cuts. This dovish outlook, supplemented by market conditions favoring riskier assets, has led analysts to predict a continued softening of the dollar.
In terms of specific market influences, upcoming inflation data in the U.S. is expected to be significant, with predictions of a modest core CPI increase. This may further affect Federal Reserve monetary policies, potentially prolonging any dollar weakness. Additionally, geopolitical concerns, particularly those arising from U.S.-China trade negotiations and rising global dedollarization trends, adding to the uncertainty surrounding the dollar’s strength, likely impacting investor sentiment.
Concurrently, the Israeli new shekel has demonstrated considerable resilience. It appreciated by approximately 9.3% against the dollar during the second quarter of 2025, largely due to positive changes in geopolitical risk perception and Israel's solid economic fundamentals. Analysts at UBS have adjusted their USD/ILS forecasts downwards, suggesting a further strengthening of the shekel due to declining risk premiums.
Recent data indicates that the USD/ILS rate stands at 3.2972, which is notably 1.6% below its three-month average of 3.3512. This rate has stabilized within a 6.0% range between 3.2621 and 3.4578, suggesting a market atmosphere characterized by relative calm despite surrounding geopolitical tensions.
Moving forward, experts anticipate that the combination of dovish U.S. monetary policy, positive sentiment toward the Israeli economy, and the effects of ongoing geopolitical dynamics will likely continue to shape the USD/ILS exchange rate, with expectations leaning toward a firmer shekel in the near term.
