Ruffling feathers was certainly the theme of the week including German Chancellor Angela Merkel ruffling the feathers of the women in Israel’s hi-tech scene and US President Trump taking aim at his country’s own central bank (more on that to come). Meanwhile, the shekel gets pushed around at the IsraTransfer Trading Desk, there’s a new sheriff in town at the Bank of Israel. All that plus a hitch gets put in the interest rate hike, and the country’s credit rating finds itself on borrowed time. Ready to get caught up on what you may have missed? Then check out our latest installment of The Israel Business Week Roundup.
From the IsraTransfer Trading Desk
To call last week a wild one in the currency markets might actually be understating things a bit. Late in the week US President, Donald Trump sent the markets reeling with some aggressive comments about the United States Federal Reserve Bank which had a weakening effect on the shekel across the board. Amongst the short-term fallout from his bombastic commentary were doubts cast on the immediate likelihood of interest rate cuts by the Bank of Israel.
From a look at the charts it would appear that the 3.65 level in the USD/NIS truly was a source of resistance. The attempt to break through it early in the week proved unsuccessful, and after a brief retry by the middle of the week, the rate retreated back to 3.62. The news out of the US certainly didn’t help matters either, however, with it now baked into the markets we are looking for yet another retest of 3.65 again in the days to come, renewing our hopes that it can power its way higher in the weeks to come.
In GBP/NIS analysis, it’s officially crunch time for Brexit and one would be hard pressed to find a climate with more uncertainty. One day we are seeing positive news (80% chance of a deal being done) which saw the sterling/shekel rate climb above 4.800 for the first time in months. The next day we see a possible mutiny for Theresa May and sterling fall back to 4.7540. These swings in sterling will continue until we have a clearer direction on where Brexit is heading, so once again we’ve returned to the familiar wait-and-see posture.
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Bank of Israel Representative Exchange Rates
For the Week of October 8 thru October 12, 2018
|Currency||Symbol||Week High||Week Low||Week Close|
|South African Rand||ZAR/NIS||0.2515||0.2421||0.2515|
This Week’s Notable Economic Announcements
|Monday, October 15th||ILS||Inflation Rate|
|Monday, October 15th||USD||Advance Retail Sales|
|Tuesday, October, 16th||EUR||Euro-Zone ZEW Survey (Economic Sentiment)|
|Wednesday, October 17th||GBP||Consumer Price Index|
|Thursday, October 18th||AUD||Employment/Unemployment Rates|
|Friday, October 19th||CAD||Consumer Price Index|
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Interest Rate Tracker
It was a bit of a deflating week for those who had been hoping for an interest rate increase, as Bank of Israel elected to sit on its hands once again in Governor Karnit Flug’s final meeting. Behind the decision was due partially to a lack of inflation in the economy, as it continues to remain at the extreme low end of the government’s target range of 1% to 3% for 2018. Although the consensus is that an increase is the correct move for the long-term, the timing of when to do so continues to remain an area of debate. That said, Monday’s release of the latest inflation figures from the Central Bureau of Statistics should provide a significant telltale sign if the hike could be coming at the upcoming November meeting, or if as many experts are now predicting, it won’t in fact happen until 2019.
It was a praiseworthy week for Israel’s economy as the International Monetary Fund announced an upgrade in its GDP growth forecast for 2018. In a revision of its previous estimate the IMF boosted its projection to 3.6% from its 3.3% one back in March, due in part to all-time low in unemployment of nearly 4%. Although this year’s upwardly revised growth rate for Israel far surpasses that of developed Western nations by more than a full percent (2.4%), the country’s recently upgraded credit rating could be at risk should it fail to get it record high budget deficit under control within the next three months.
New Bank of Israel Head Appointed
One big mystery surrounding the Bank of Israel came to a resolution last week with the appointment of its new governor. If confirmed, taking over the reins from the outgoing, Karnit Flug, is highly credentialed Wharton School of the University of Pennsylvania professor, Amir Yaron. While highly regarded as a financial and banking expert, the move did raise some eyebrows due to Yaron’s lack of monetary policy experience. As such speculation has begun to surface that this could result in an even further delay in the increase of interest rates with Yaron wanting to first get a lay of the land before taking any action.
Additionally, criticism of the Yaron pick has also included his potential lack of intimate knowledge regarding the Israel economy given his having lived abroad for the past 20 years. Others have argued that his appointment may be more than just a little bit politically motivated, as both Prime Minister Netanyahu and Finance Minister Kahlon have long desired a less adversarial relationship with the head of the BoI than was the case under Flug.
Ok, consider yourself all caught up. Wishing everyone a very productive and 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.