Shekel Stable After Israel's Rating Downgrade

Spot USD/ILS sits at 3.6858, just above neutral levels, showing muted reaction to Israel's sovereign credit rating downgrade announced last Friday by Moody's. A break above Jan 17 high of 3.8000 would be an encouraging signal for bulls, while bears keep an eye on Jan 31 low of 3.6286.

• Moody's cut Israel's credit rating from A1 to A2 with a negative outlook, citing the toll of the conflict with Hamas on the country's finances. PM Netanyahu commented that the rating change was "entirely due to the fact that we are at war" while Finance Minister Smotrich went further, calling it a "political manifesto." BoI Governor Yaron called on the government to address the issues raised by Moody's in its report. Sources told Bloomberg that Israel will have to sell a near-record amount of bonds this year to fund its ongoing war.
• Israel has been preparing for a ground operation in Rafah despite growing international condemnation, with US President Biden reportedly asking PM Netanyahu not to launch the attack without a "credible" plan to protect civilians.
• Israel will report January trade balance on Tuesday, but the focus this week will be on CPI figures, due for release on Thursday. Inflation may have decelerated to +2.7% Y/Y in January from +3.0% prior, according to Bloomberg consensus.