Apple and its trillion dollar valuation may have been grabbing all the headlines of late, although Bank of Israel has been making some waves of its own – including a new candidate emerging to be the next Governor. Plus, interest rates could be on the rise, hundreds of millions of dollars in foreign currency reserves make Aliyah, and the housing market resumes its summer vacation. All that, plus we’re talking some serious Turkey at the IsraTransfer Trading Desk. Ready for our latest Israel Business Week Roundup? Then scroll down and let’s get to it.
From the IsraTransfer Trading Desk
Trade wars involving the US were once again the hot-button topic last week, culminating on Friday with President Trump’s authorization of the doubling of tariffs on Turkish steel and aluminum. The news resulted in strengthening in the USD, which was to be expected, as traders typically flock to the safe haven of the American currency in the wake of geopolitical instability. For much of the same reason, due to concerns over European bank exposure to Turkey, we could also see a stronger US dollar in the week ahead.
Once again the economic calendar is extremely light this week, with the exception of Advanced Retail Sales on Wednesday, which we don’t expect to have too much sway over trading one way or the other – which means that once again it’s all about whatever headlines President Trump ends up creating. Additionally, this week will also be important from a technical trading perspective as we will see if the USD/NIS rate can hold at 4.71. If it does, the potential to become a key level of support might indeed take hold.
As such, with the trend maintaining its bullish bias, our inclination is a stronger US dollar once again this week, and with it a higher USD/NIS exchange rate, even as we continue to believe that chances for further weakening in the shekel are limited from here.
It was yet another rocky road for sterling and the GBP/NIS, as concerns over whether a Brexit deal will get done continue to make their presence felt. After a visit up to 4.83 on August 1st, the exchange rate has since given back most of its gains, including last week’s rough ride that saw it trade from 4.80 all the way back to 4.74. As a matter of fact, with a decline of 5.1% over the past three months, none of the world’s other top 10 currencies has performed as poorly against the US dollar than sterling.
Not surprisingly, the sense of urgency surrounding a Brexit deal is at an all-time high with experts speculating that sterling could be poised to once again get smacked around should no deal be reached. On top of that, with these desperate times are apparently coming some desperate measures, including word that Prime Minister May is now reportedly rebuffing the EU’s timeline demands in the hopes that US President, Donald Trump, may actually come to the UK’s rescue!
Much like in the United States, it’s once again a light calendar for economic news for England this week, save for the England’s Consumer Price Index on Wednesday. However, it would seem almost unfathomable that anything that would come out of those numbers could have any kind of major fundamental impact on the GBP. As is, has, and will continue to be the case, it’s all about Brexit, and whatever news this week brings. To think things couldn’t get worse for sterling would be presumptuous at best. Therefore, we are once again reiterating our opinion that those adverse to risk may want to consider converting their sterling at these levels – especially given the shekel’s potential to strengthen further in the week to come.
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Bank of Israel Representative Exchange Rates
For the Week of August 6th thru August 10th, 2018
|Currency||Symbol||Week High||Week Low||Week Close|
|South African Rand||ZAR/NIS||0.2782||0.2629||0.2630|
This Week’s Notable Economic Announcements
|Tuesday, August 7th||AUD||RBA Cash Rate Target|
|Thursday, August 9th||CHF||Unemployment Rate|
|Friday, August 10th||GBP||Gross Domestic Product|
|Friday, August 10th||GBP||Employment/Unemployment Rates|
|Friday, August 10th||USD||Consumer Price Index|
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Bank of Israel Foreign Exchange Reserves
Following five consecutive months of declines, BoI’s foreign currency exchange reserves saw an increase in its monthly holdings, this time by a jump up of nearly $1 billion USD. Interestingly enough the increase was not the result of any new purchases, but rather from the devaluation of the shekel in global currency trading which helped boost the reserves by over $600 million USD. This was realized in the over $330 million USD transferred in from abroad by the government, plus another $11 million USD brought in by the private sector.
Over the past year Israel’s foreign currency reserves have grown from $110 billion USD to $115 billion USD, and currently represent over 30% of the State’s GDP. Reporting for Israel’s entire GDP in the second quarter is due to be released on Thursday, with an annualized forecast of 3.2%. Stay tuned.
Israel Interest Rate Watch
Those speculating about the future of Israel’s interest rates will most likely have their eyes on the Central Bureau of Statistics this Wednesday with the release of its inflation report for the month of July – usually a harbinger for the direction of interest rates going forward. As we’ve mentioned in past weeks, with inflation resuming its climb back to the BoI’s target range of 1-3%, the current consensus is that the central bank is still leaning towards a hike in the 4th quarter of this year. Should it choose to do so it would mark the first time since 2015. Last month’s numbers came in at 0.1%, and the latest forecast is calling for the same result again, so it will be interesting to see if the trend has continued.
Israel Real Estate
What a difference a week makes, especially when it comes to data about the Israel housing market. After reporting in our previous roundup about the increase in deal volume in May, this week the Ministry of Finance reversed course with the less-than-stellar news that just 8,500 housing units were purchased during the month of June – a 10% decrease from the same time a year ago. Among the largest to suffer from the slowdown are contractors in the Tel Aviv area who are often the beneficiaries of real estate investors that have typically accounted for 40% of purchases in recent years. Lately, however, investors have only been accounting for approximately 25%
On a positive note, the poor numbers were offset a bit by purchases made through Ministry of Finance’s Buyer Fixed Plan. As a matter of fact, in an encouraging sign, the number of deals was actually twice as high as in the same period last year.
Ok everyone consider yourself back in-the-know. Have a very prosperous week from IsraTransfer.
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