Fresh off the Chagim season it’s back to work for the Israel business scene and not a moment too soon – something El Al Airlines may want to take note of. In shekel news Bank of Israel’s Governor-emeritus says to keep the change, the currency shows its softer side at the IsraTransfer Trading Desk, and the job market truly has a lot to work on. Our Business Week Roundup is back and better than ever, so read on and let’s get to it.
From the IsraTransfer Trading Desk
Not surprisingly the lighter volume over the Chagim in the second half of September gave way to increased volatility, resulting in a stronger shekel and USD/NIS rates at lows around 3.55, which had not been seen since earlier this spring. However, as was to be expected, the return to normal trading activity has resulted in more stability, as well as what we believe to be a more accurate representation of short-term reduced shekel strength. Consequently, with the return of the weaker shekel the US dollar-shekel exchange rate now finds itself back up above 3.62.
From a technical trading perspective, the rate is now approaching 3.65, a key level of resistance going all the way back to the middle of July. Should it break through there, we could see a move up to possibly the 3.67 range, and with an (albeit unlikely) upside of over 3.70. Conversely, should strength return to the shekel we see potential downside back to around 3.56, where a good deal of support has proven to be soundly in place.
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Bank of Israel Representative Exchange Rates
For the Week of October 1 thru October 5, 2018
|Currency||Symbol||Week High||Week Low||Week Close|
|South African Rand||ZAR/NIS||0.2586||0.2435||0.24.57|
This Week’s Notable Economic Announcements
|Wednesday, October 10th||GBP||Gross Domestic Product|
|Thursday, October, 11th||GBP||Bank of England Credit Conditions and Bank Liabilities Survey|
|Thursday, October, 11th||USD||Consumer Price Index|
|Friday, October 12th||EUR||Euro-Zone Industrial Production|
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Interest Rate Decision
“Not so fast” should really be the motto when it comes to interest rate hikes at the Bank of Israel. After waiting nearly three and a half long years for an increase, once again Governor Karnit Flug, in her final meeting as head of the Bank of Israel, decided to leave rates unchanged. Industry opinion had been mixed heading into the decision, with most analysts outside of Israel believing an increase was coming, contrary to those inside the country. While an increase had been the expected move across the board over the past few weeks, sentiment quickly shifted to “no change” in the days leading up to yesterday’s announcement and was believed to have already been priced into the market. A lack of economic inflation, despite a recent move up to the government’s 1% to 3% target (currently 1.1%) was seen as one of the main culprits behind the decision to hold off on any changes for now. As a result, eyes will now be on October 15th when the latest figures are released, which could shed more light on whether a rate increase will happen this year, or ultimately be pushed off until 2019.
The Up and Down Economy
Help was certainly on the way this summer in the Israeli economy as the latest data from the Central Bureau of Statistics showed unemployment dropping to 4% in the month of August. The good news didn’t stop there either, with data showing the average monthly wage climbing to nearly 11,000 NIS, another key indicator of a robust labor market.
Israel’s foreign currency reserves continued its decline since the beginning of the year, falling to $115 billion USD, down from the $117 billion USD it started at in January. Contributing to the lower figures in the month of September was the transfer out of over $300 million USD by both the private and public sectors combined, as well as a revaluation of current assets that decreased the reserves by another $258 million. In an attempt to offset the decrease, $16 million USD in foreign assets was purchased by the Bank of Israel as part of its repurchase program designed to limit the negative effects of natural gas production on the exchange rate.
Not everything was on the decline, however, as the International Monetary Fund has revised its latest GDP growth forecast for Israel economy upwards to 3.6% from 3.3% for 2018. Going forward, the IMF also sees 3.5% growth for 2019, and 3.4% for 2020. While the figures are lower than the world growth estimates of 3.7%, it is still drastically higher than projected long-term rate of 1.5% for Western developed countries. Additionally, the IMF also raised its expected inflation growth for the year to climb to 0.9% from 0.7%, which should play a key role in determining how potential future interest rate increases will play out going forward.
Ok, consider yourself all caught up. Wishing everyone a very prosperous week from IsraTransfer.
Searching for the easiest way to send money to Israel? IsraTransfer is Israel’s leading currency exchange firm specializing in wire transfers of US dollars (USD), British sterling (GBP), Canadian dollars (CAD), Euros (EUR), and more to Israel. Founded in 2008, and with over 1 billion NIS exchanged, we are the exclusive operators of the AACI Currency Exchange Program.