The shekel extended its rally Monday, bolstered by recent geopolitical agreements and positive market dynamics. The dollar weakened by 0.5% against the shekel, trading at 3.56—its lowest level since March—while the euro dropped 0.5%, trading above 3.76.
Economists at Leader Capital Markets, led by Jonathan Katz, noted, "The consistent strengthening of the shekel supports lower inflation, despite recent announcements by food companies of price increases for several products."
In the past weeks, the shekel has surged 7.6% against the central bank’s currency basket since late September and 1.2% last week. Inflation expectations have also dropped to 2.3% over the past 12 months. These trends may prompt the Bank of Israel to consider a rate cut in Q1 or early Q2 of 2025.
On global currency markets, the Dollar Index fell 0.2% to 105.9 points. The euro edged up 0.1% to $1.058, while the British pound gained 0.3%, trading at $1.277.
In Japan, the dollar rose 0.3% to 150.4 yen after upward revisions to GDP data showed a 0.3% quarterly expansion and a 1.2% annualized growth rate, strengthening expectations for an upcoming rate hike by the Bank of Japan.
South Korea’s won dropped 0.5%, with the dollar trading around 1,431 won amid political turmoil. President Yoon Suk Yeol narrowly avoided impeachment in parliament, but calls for his resignation persist. Reports indicate prosecutors have launched a criminal investigation into Yoon for potential charges of treason and abuse of power.
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Protesters call for resignation of South Korean President Yoon Suk Yeol
(Photo: Philip FONG / AFP)
In Europe, the European Central Bank (ECB) is expected to cut its deposit rate by 25 basis points, from 3.25% to 3%, on Thursday, alongside a similar reduction in the lending rate to 3.15%.
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In the U.S., key inflation data is due this week, with the Consumer Price Index for November set to be released Wednesday, followed by the Producer Price Index on Thursday. Leader Capital Markets chief economist Uri Greenfeld noted, "Assuming no major surprises in the CPI, it’s likely the Fed will cut rates by another 25 basis points at its next meeting, with an 86% probability already priced in."
However, Greenfeld added, "If recent strong data continues, some Fed members may begin advocating for an earlier halt to rate cuts in early 2025."
In China, inflation reached its lowest level in five months. The November Consumer Price Index rose just 0.2% year-on-year, below the 0.5% forecast and following a 0.3% increase in October.
With global markets closely watching inflation trends and rate decisions, the shekel’s strength and the Bank of Israel’s next moves remain pivotal for domestic and international investors.