Clocks weren’t the only things moved forward in Israel last week, as exchange rate decisions in the US and UK advanced shekel exchange rates for both currencies. Elsewhere, the Central Bureau of Statistics literally put quantities on qualities, and the Ministry of Finance says it’s ready to search for the afikomen. All that plus our trading desk sees potentially volatile trading in the days ahead, and Bank of Israel looks to get greener just in time for spring. Ready to find out what we mean? Then read on and let’s get busy.
From the IsraTransfer Trading Desk
As expected, economic announcements were the currency markets’ big drivers last week, headlined by both the new US Federal Reserve Chairman’s first interest rate decision. In what was seen as a widely anticipated move, the US Federal Open Market Committee (FOMC) moved to raise interest rates by a quarter of a percent. The move marked the first of what will be five rate hikes in the US, including three more this year and one more next year. Although hardly a surprise, the action and its subsequent comments did bring strength to the dollar, driving the USD/NIS exchange rate briefly above 3.50. Unfortunately, the rally was only short-lived, as market orders quickly pushed the rate back down, ultimately closing the week at 3.48.
In the UK, the news from the Bank of England was a little less positive, however, as comments made probably mean interest rate hikes are less likely. Typically this would normally mean bad news for sterling, however, the GBP/NIS exchange rate actually rose to 4.92 at the end of the week following some positive Brexit news on Friday. Moving forward, we need to see what happens early next week as the exchange rate sits within striking distance of the key 5.00 level, which we continue to believe maintains a great deal of psychological resistance.
All that said, anything is possible when it comes to shekel trading over the next few days as we head into a week light on economic announcements and heavy on holidays. The abbreviated trading week in the UK and US due to the Easter holiday, as well as Pesach in Israel, should mean lighter volume, and as we’ve mentioned in past reports, heightened volatility as a result. Without any fundamental developments on the near-term horizon to change the trend, we continue to see the shekel staying strong, and are not opposed to using exaggerated swings to the upside to take advantage of favorable exchange rates.
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Bank of Israel Representative Rates
For the Week of March 19th thru March 23rd, 2018
|Currency||Week High||Week Low||Week Close|
|South African Rand||0.2984||0.2866||0.2965|
Israel Real Estate
There was no shortage of news swirling about the Israel real estate sector, including the report of a 14% drop in building starts in 2017 from the previous 12 months. The decrease in construction to just over 46,000 starts from nearly 54,000 in 2016 could be a tip-off that the continued decline in housing sales is causing contractors to curtail their building activity. Given the trail off from the year prior, it now appears that the government’s annual goal of 60,000 starts seems exceedingly unattainable, especially considering the nearly quarter-worth of buildings needing to be made up in order to close the gap.
Elsewhere, questions of whether the economy could be headed for a slowdown in general have begun to creep into the conversation due largely in part to the now four-month long slump in home sales. Given the large portion real estate plays in Israel’s economy, as the market continues to cool off, downturns in new construction, as well as renovations, and investment in major home electronic appliances could also all take their toll on the economy in a growing ripple effect. Despite the current sales dry-spell and the somewhat gloomy outlook, Minister of Finance, Moshe Kahlon, remains optimistic about the longer term prospects of the real estate market, due large in part to the flourishing Mechir Lemishtaken (Buyer’s Price) program for first-time home purchasers, and its potential ability to influence the market.
Stats All Folks
Life is good in Israel, literally, according to the Central Bureau of Statistics’ latest “Quality of life, Sustainability and National Resilience” report. In highlighting its latest findings, nearly 90% of Israelis consider themselves satisfied with their lives, and almost the same amount share the sentiment about their careers. Although only just less than 60% are content with their salaries, the same percentage consider themselves happy with their economic situation despite the seemingly universal complaint.
In health care standings, Israel finds itself among the leaders, namely in life expectancy at birth. At 82.5 years for both genders, Israel ranks number eight among the world’s 183 countries, and more than three full years above those born in the US. However, the rapidly aging population does have the Ministry of Health concerned about an overwhelming of the country’s medical institutions. Unfortunately, not all the news on the health front was a breath of fresh air, especially in the findings regarding the number of cigarettes smoked per year by residents over the age of 15. Israel’s average of 1,346 cigarettes per resident places it at 44th in the world. Furthermore, the data also suggests a rising trend in the habit, contrary to cigarette smoking decreasing in most other parts of the world. Furthermore, less than 20% of Israelis over the age of 21 reportedly live a healthful life including diet and exercise, in addition to not smoking.
The extensive study also goes on to show Rehovot taking top honors as the city with the highest quality of living among the country’s 14 largest metropolises. Other notable showings from the report include a further continuation of Israel as a world leader in water recycling, over 80% are happy with where they live, and over half of the workforce uses mass transportation to get to work – and that’s just scratching the surface!
Israel’s citizens may be treated to a little extra taste of freedom this Passover, as Finance Minister, Moshe Kahlon, announced last week that he plans to cut taxes after the upcoming holiday. The decision came on the heels of economic reports showing a successful continuation of Israel’s 2017 economic momentum carrying through the first quarter of 2018. Although Kahlon failed to list the specific taxes he plans to cut and by how much, he did indicate that decisions would be made immediately after the festival, and added that the measures are intended to both continue to grow the economy, as well as help working couples increase their extra income.
Money In The Bag
In light of its overwhelming success in reducing disposable plastic bag consumption at large supermarkets, Bank of Israel has announced that it will advocate for extending the ten agorot fee to neighborhood grocery stores, small supermarket chains, and even Super-Pharm. Currently, these businesses are responsible for the distribution of a whopping 860 million plastic bags distributed yearly.
Global research has found that no matter the fee amount, the number of bags consumed drops by 80% wherever one is imposed. The data is consistent with the results experienced in Israel since the law was enacted in January of 2017. Additionally, the imposition of the fee also saw an increase in the number of those using reusable bags from 28% to 70%. Should Bank of Israel’s recommendation be accepted, the measure could help pave the way in the elimination of over 680 million plastic bags finding their way into circulation annually.
Ok everyone, consider yourself officially caught up. Have a very productive and prosperous week, and Chag Sameach from IsraTransfer.
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