Shekel Gains After Netanyahu Presses Pause On Judicial Overhaul

Spot USD/ILS stays under pressure even as the BBDXY index has ticked away from its worst levels this session after Prime Minister Netanyahu's announcement of a delay to the controversial judicial overhauls provided some reprieve to the shekel.

• The rate last deals at ILS3.5452, down 369 pips on the day, testing its 50-DMA (ILS3.5465). It pierced that moving average twice in the recent few days but refused to close below there. A sustained move under Mar 9 low/50-DMA (ILS3.5669/3.5465) would allow bears to take aim at the ILS3.5 figure.
• USD/ILS one-month risk reversals have tumbled to their worst levels since Mar 10, while one-year tenor showed at its lowest point since mid-August, as some of the immediate concerns about the domestic political situation eased.
• U.S. Ambassador to Israel told the Army Radio that Netanyahu will likely receive an invitation to the White House after the Passover. The Biden administration has reportedly been pressuring Netanyahu to press pause on his judicial reforms, which intensified after the ouster of Defence Minister Yoav Gallant.
• The judicial saga is not over, even if Netanyahu agreed to negotiate, as he appears determined to implement judicial reforms. Furthermore, he traded his far-right ally's consent for the pause in exchange for a promise to facilitate the creation of a National Guard, which may fuel new tensions further down the road.
• Still, the shekel is having a sigh of relief from the removal of near-term political risk premium coupled with hopes that sustained pressure on Netanyahu and his coalition could force the ruling administration to water down its initial proposals.