ILS: Shekel Extends Losses, Participants Weigh Geopolitics & Global Market Flows

Spot USD/ILS printed new cyclical highs at 3.8427 before cutting the bulk of initial gains as market participants weigh global risk-off flows against headlines surrounding regional geopolitical risk. The rate last deals at 3.8195, up 145 pips on the session, with bulls taking aim at 3.8775, the 61.8% retracement of the Oct 30, 2023 - Dec 25, 2023 sell-off.

• Iran's Foreign Ministry spokesman took the edge off earlier combative rhetoric to some extent, noting that his country doesn't want to escalate tensions in the region, despite vowing to "punish" Israel for assassinating one of Hamas leaders in Tehran. Meanwhile, there is fundamental uncertainty around the timing and form of the Iranian retaliation. Israel has been preparing for the Iranian offensive, with local media reporting that it doesn't rule out a pre-emptive strike should intelligence indicate that an attack is imminent. According to an Axios report, US Secretary of State Anthony Blinken told his G7 counterparts on Sunday that the Iranian attack could take place within the following 24-48 hours.
• Tensions within Israel's ruling coalition resurfaced as National Security Minister Itamar Ben Gvir yet again demanded a greater say over running the war in Gaza, or else he would block "the Rabbis Law" backed by the ultra-Orthodox Shas party, which also props up PM Netanyahu's government.
• The TA-35 Index fell 2.5% on Sunday and a further 1.6% today. The index showed below its 200-DMA for the first time this year, before clawing back some losses.