It was definitely a week where plenty was cooking, and we aren’t just talking about the Yom HaAtzmaut barbecues. In the currency markets a high-five had sterling officially psyched up, however, the real estate market experienced a downer. Elsewhere, Israel once again finds itself at the head of the class, the IMF gives a generous tip, and the “Rad” Israeli company that has astronauts dressing for success. All that plus exchange rates seek to defy gravity at the IsraTransfer trading desk. The countdown is on to another out-of-this world edition of our Israel Business Week Roundup, so sit back, relax and prepare for launch.
From the IsraTransfer Trading Desk
It was an emotional week for sterling, as the British currency finally broke through the psychological level of 5.00. As we predicted last week the move above this key level of resistance was well received by the markets and even drove the GBP/NIS exchange rate as high as 5.06 before dropping back down to close the week at 4.94. We attribute the run-up earlier in the week to anticipated optimism that UK interest rates would be raised, however, point to a combination of Bank of England’s guidance that they wouldn’t be, as well as poor retail sales figures, for the disappointing correction that was to follow. Going forward we expect sterling to re-test the 5.00 level sooner rather than later, and this time remain above it longer this time around.
Bank of Israel Representative Rates
For the Week of April 16th thru April 20th, 2018
|Currency||Week High||Week Low||Week Close|
|US Dollar (USD)||3.5439||3.5022||3.5297|
|British Sterling (GBP)||5.0683||4.9375||4.9425|
|Australian Dollar (AUD)||2.7477||2.7028||2.7067|
|Canadian Dollar (CAD)||2.8108||2.7635||2.7647|
|South African Rand (ZAR)||0.2948||0.2896||0.2925|
|Swiss Franc (CHF)||3.6811||3.6172||3.6215|
Israel Real Estate Update
Israel’s housing market keeps on slumping, with data released last week showing a drop of 12% in sales in the month of February both from the month prior, as well as in the same period a year ago. Although only 8,700 homes were sold in the month, 1,100 were the result of the Ministry of Finance’s Buyer Fixed Program. While the slowdown has been taking a toll on many of the State’s real estate developers, the Ministry did disclose that those contractors participating in the Buyer Fixed Program have actually been affected less.
The data also revealed an influential group seemingly missing in action whose inactivity is also resulting in downward pressure on the market, Israel real estate investors. Per the report, purchases by this group dropped precipitously in February to just 13%, resulting in a historic low. The biggest drop offs came in both Tel Aviv and Netanya; the latter experiencing a decline of 70%! However, from a somewhat positive perspective, while lower housing prices have become the trend lately, the 0.02% decline marks a less steep decline than in previous months, that could hopefully represent a potential ray of sunlight that new investment money may be ready to make its way back into the market going forward.
IMF Praise, ICYMI
In updating our previous story regarding Israel’s standing with the International Monetary Fund (IMF), positive news came with the release of its revised global forecast. In the latest report, the IMF is calling for an uptick in inflation to 1.3% in 2019, as well as GDP surpluses of over 2.5% in both of the next two years. On the whole, the IMF sees the Israeli economy growing by 3.3% in 2018, and ultimately 3.5% in 2019, not far off from its estimate of 3.9% growth in the global economy. Unfortunately all good things must come to an end, including for Israel’s economy, as the IMF also projects growth ultimately declining in 2020. That said, in guidance very fitting of the Pesach season, the IMF suggests developed countries capitalize on the next two “good years” now with economic reforms designed to benefit the larger parts of their populations, in order to prepare themselves for the “lean years” that are expected to follow.
Making the Grade Once Again
For the second year in a row Israel’s long-term debt rating has made the honor roll with the reiteration of its A+ score by global credit rating agency, Fitch. Further backed by a “stable outlook,” Fitch attributed the impressive accolade to a healthy mix of robust macroeconomic performance and institutional stability, despite a high debt-to-GDP ratio, security risks, and political instability.
"In its 70th year, Israel's economy is stronger than ever, and has won great confidence from the world's leading rating agencies."– Minister of Finance, Moshe Kahlon
Even with the A+ score, Fitch did caution Israel about resting on its laurels, citing potential negative effects that proposed tax cuts could have on the State’s economy – something Kahlon was surely not happy to hear. As well, the agency remained cautious over geopolitical instability in the region, namely involving Syria, however, believes the expansion of Intel’s manufacturing operations, as well continued development of the Leviathan natural gas reserves are certainly developments worthy of optimism.
The United States’ National Aeronautics and Space Administration (NASA) is about to get a wardrobe upgrade, as in new cutting-edge radiation suits courtesy of Israel astro-fashionistas, StemRad Ltd.. The suits, resembling vests, were originally designed for female space travellers to protect organs and tissues such as the lungs, bone marrow, and others highly vulnerable to radiation damage, and are slated to be tested in an upcoming deep space mission. If successful, StemRad hopes to have them implemented into future NASA space missions. This isn’t the first time that StemRad has teamed up with an American company, including a partnership with Lockheed Martin on the aerospace manufacturer’s Orion space capsule in 2015.
Ok everyone, consider yourself back in orbit. Have a very productive and prosperous week from IsraTransfer.