USD/ILS Outlook: Bearish, as the exchange rate is below its recent average and near its recent lows, pressured by increasing uncertainty about US economic policies.
Key drivers:
• Rate gap: The Federal Reserve is expected to ease rates in 2026, while the Bank of Israel recently cut rates, which may support a strengthening ILS.
• Risk/commodities: Volatility in the oil market could further influence market confidence in the USD, particularly amid geopolitical tensions.
• One macro factor: The US faces potential government shutdown risks and has seen increasing tariff threats, contributing to its currency's weakness.
Range: Movement is likely to hold within the recent range, as the USD/ILS appears quite stable despite the downward pressure.
What could change it:
• Upside risk: A surprise strengthening in US economic reports could boost the USD.
• Downside risk: Further cuts in the Fed's rates or escalating tariffs could weaken the USD further.
