Shekel Gains Amid Opposition Call For Resumption Of Judicial Overhaul Negotiations

USD/ILS extended losses after the US CPI miss, but the shekel had already traded with a bullish bias beforehand. The rate last changes hands at 3.6488, nearly 400 pips lower on the day. Losses have been limited by the 100-DMA (3.6460) and a convincing break below that moving average would bring the 200-DMA (3.5634) into view.

• Some of the shekel's strength might be linked to optimism re: Israel's political situation. The Knesset filled a vacant seat in the Judicial Selection Committee with an Otzma Yehutit lawmaker, with the support of some opposition MKs.
• The decision removes one source of tensions between PM Netanyahu's Likud and its far-right coalition partner, falsifying earlier speculation that the Premier could renege on a promise made in the coalition pact by promoting a Likud candidate.
• Furthermore, opposition leaders Benny Gantz and Yair Lapid called on the government to convene the JSC, with Gantz pushing for a resumption of the suspended talks on the judicial overhaul.
• While there are no givens as to where the process is headed at this point, a negotiated, watered-down version of the government's judicial reforms would be a scenario preferred by the markets.
• It is worth noting that the government continues to advance the reforms, despite intensifying protests. However, considerable risk premium had already been priced by the markets and any positive signals may bring some reprieve to the shekel.