Shekel Prints New Three-Year Lows Before Rebounding

Spot USD/ILS soared as high as to ILS3.7130 this morning, printing new three-year highs as a result, before reversing gains as wider demand for the greenback subsided and the BBDXY index pulled back into negative territory. Domestically, the political turmoil surrounding the government's planned judicial reforms continues to grab attention.

• The rate last trades at ILS3.6760, oscillating around neutral levels. A clean break and consolidation above the 76.4% retracement of the 2020 - 2021 sell-off/Feb 27 high at ILS3.6892/3.6935 would bring Mar 17, 2020 high of ILS3.8894 into view. Bears need a retreat past Mar 9 low of ILS3.5669 to regain poise.
• USD/ILS one-month implied volatility this morning touched levels last seen in March 2020 amid the outbreak of the COVID-19 pandemic, while one-year tenor has climbed to its highest point since early November 2022. Shorter-end implied volatilities have so far refrained from testing recent extremes.
• Opposition leaders pushed back against the government's new outline for the judicial overhaul, which delays the adoption of some of the proposed bills until after Passover (April 5-13) to buy time for negotiations. The opposition argued that the new plan remains "a framework for a hostile political takeover of the judicial system" and does not represent any significant concession.
• The Bank of Israel is expected to publish its latest CPI inflation forecast at some point today.