ILS: Shekel Resumes Gains After BoI's In-Line Rate Decision

USD/ILS has resumed losses after a pause yesterday, shedding 212 pips so far to last trade at 3.6664. The rate refreshed its worst levels since the beginning of June and bears look for a move through Jun 6 cycle low of 3.6521. Meanwhile bulls need a recovery past Jul 1 high of 3.7810 to regain poise.

• The Bank of Israel delivered the widely expected on-hold rate decision Monday, making references to familiar war risks and introducing some tweaks to staff forecasts. 
  • Goldman Sachs wrote that the BoI's remarks about risk premia was largerly a reference to the shekel, which the central bank expects to "stay weaker for longer than previously expected." They note that "more favourable CPI prints in the coming months and a reduction in shekel volatility will enable the BoI to restart its cutting cycle sooner than consensus expects and market pricing implies."
  • JP Morgan wrote that "a significantly more hawkish messaging was arguably a bit of a surprise" in yesterday's decision. Their forecast "remains somewhat more dovish than the prevailing market view and, now, the BoI’s messaging." They still have two cuts in their forecasted profile for the BoI, but MPC messaging prompted them to "push the timing of the next expected 25bp cut to November, from October previously."
• Tensions in Israel's ruling coalition resurfaced as far-right National Security Minister Itamar Ben Gvir clashed with the ultra-Orthodox Shas party on a bill on funding religious council, threatening not to support it unless he gets a seat on the war cabinet, even as the body was effectively disbanded several week ago.