Shekel Gains Ahead Of BoI Rate Decision Next Week, Budget Talks Continue

USD/ILS continues to lose altitude ahead of the Bank of Israel's monetary policy decision next week, with consensus looking for a 25bp rate hike at present, following the release of above-forecast inflation & GDP data earlier this week. The rate last operates at ILS3.6362, down 67 pips on the session, with bears looking for a slide past May 2 low of ILS3.6049.

• The average CPI inflation forecast for the next 12 months remained at +3.0% Y/Y in the May edition of the Bank of Israel's survey of commercial banks and economic consultancy companies. Expectations based on internal interest rates of the five large banks) also stayed unchanged at +3.0% Y/Y. Inflation expectations derived from the capital market eased to +2.9% Y/Y from +3.1% recorded in March.
• Coalition parties continue to wrestle over the national budget, which must be passed in parliament by the end of the month to avoid a fresh election. Far-right Otzma Yehudit walked out of Knesset floor votes yesterday, demanding more funds for its priorities. Meanwhile, a faction of United Torah Judaism (three out of their seven lawmakers) threatened to vote against the spending plan if the government doesn't meet their call for an additional ILS600mn in funding for religious scholars.