Shekel Oscillates, Local Data Under Scrutiny

USD/ILS has continued to oscillate between gains and losses, albeit in a tighter range than yesterday, when it printed a Doji candlestick. The shekel has been looking for cues in domestic political developments as well as local data releases. The pair last trades -43 pips at 3.7466 and bearish technical focus falls on Aug 2 low of 3.6258. Bulls see Mar 17, 2020 high of 3.8894 as a key target.

• Data yesterday showed that Israel's CPI inflation eased to +3.3% Y/Y in July from +4.2% recorded in June, missing the +3.5% median estimate in a Bloomberg survey. Inflation is approaching the Bank of Israel's +1%-3% Y/Y target range, supporting expectations of a continued pause in interest rates.
• Goldman Sachs wrote that the strong base effect in transport, which was the main driver of the decrease in Y/Y inflation in July, may be expected to partly reverse next month. However, they assess the overall CPI composition as dovish and supportive of the view that the BoI will stand pat in September, despite possibly leaving the door open to further rate hikes. In their view, dovish inflation data"raise the bar for how much FX developments would have to worsen to warrant additional rate hikes at this juncture."
• Israel's annualised GDP reading topped the +2.3% Y/Y consensus forecast and printed at +3.0%, according to advance data for Q2. This came after a revised +2.9% growth in Q1.
• Looking ahead, Israel's CPI forecast will be published tomorrow.