Recent forecasts and market updates indicate a notable interplay between the U.S. dollar (USD) and the Israeli new shekel (ILS). Following the Federal Reserve's latest interest rate decision, the USD has demonstrated some bullish momentum, supported by investors recalibrating their expectations regarding potential rate cuts. Fed Chair Jerome Powell's hawkish remarks have reinforced a more robust outlook for the dollar, especially if upcoming economic indicators, such as the ISM manufacturing PMI, suggest positive trends in the U.S. factory sector.
On the other hand, the ILS has benefited from a decline in Israel's inflation rate, which dropped to 2.5%—the lowest in seven months. This moderate inflation, now within the targeted range of 1-3%, has led to speculation around potential interest rate cuts by the Bank of Israel, fostering a favorable environment for the shekel. Moreover, the shekel strengthened approximately 9.3% against the USD in the second quarter, largely due to improved sentiment among investors and a weakening dollar.
Analysts note that the shekel has recently appreciated as geopolitical tensions ease, and UBS has revised its USD/ILS forecasts downward. This shift reflects confidence in Israel's economic fundamentals and a reduced risk premium associated with regional instability. The current USD to ILS exchange rate stands at 3.2533, which is significantly below its three-month average of 3.3346, having remained stable within a range of 3.2512 to 3.4578 over the past months.
As market dynamics continue to evolve, individuals and businesses engaged in international transactions should remain vigilant, particularly in light of upcoming economic reports and geopolitical developments affecting both currencies.
