Shekel Holds Narrow Range Despite CPI & GDP Beats

The shekel holds a familiar range as participants assess Israeli macroeconomic data released at the start to the week. USD/ILS last trades at ILS3.6581, some 45 pips below neutral levels. A firmer sell-off past May 2 low of ILS3.6049 would suggest that bears are taking the initiative. Bulls look for a rally towards the cyclical high printed on Mar 20 at ILS3.7130.

• Data released yesterday showed that headline CPI remained at +5.0% Y/Y in April, despite expectations of a slowdown to +4.6%. The expectation-busting outturn prompted some sell-side desks to revise their BoI calls, as JP Morgan now expect a 25bp rate hike next week while Goldman Sachs see "material risks" for the central bank to continue its tightening cycle.
• Advance Q1 GDP data published this morning showed that the economy rose 2.5% Y/Y in the three months through end-March, beating the +1.8% consensus forecast. Growth took a hit from disruptions caused by the government's judicial overhaul and clashes in the Gaza Strip, but the blow was softer than expected. Meanwhile, the Finance Ministry trimmed its 2023 growth forecast to +2.7% Y/Y from +3.0%.
• The contentious judicial reforms return to the fore as weeks of negotiations have failed to bring any breakthrough, while Justice Minister Yariv Levin demanded pressing ahead with the legislation. President Isaac Herzog today appealed to negotiators to work with urgency towards a negotiated compromise.