June 23--The shekel has weakened against the major currencies in advance of the Bank of Israel's interest rate decision. The shekel-dollar exchange rate is up 0.21% compared with Friday's representative rate at NIS 3.4502/$, and the shekel-euro exchange rate is up 0.06% at NIS 4.6887/euro. The dollar-euro rate is $1.36/euro.
The Bank of Israel is due to announce its interest rate decision for July today. Most analysts expect the Bank of Israel to leave the interest rate unchanged at 0.75%. "Stability is expected in today's Bank of Israel interest rate decision due to the improvement in economic indicators (upward revision of the GDP growth estimate), and the accelerated rate of increase in housing prices," Jonathan Katz and the economists at Leader Capital Markets Ltd. (TASE:LDRC) estimate in their weekly macroeconomic report. Nevertheless, a continued decrease in annual inflation rates to near zero will support a reduction in interest rates over the coming two months.
FXCM Israel's research department says this morning, "Right now the ball is in the Bank of Israel's court -- it will announce its monthly interest rate decision today. In light of the shekel's sharp appreciation over the last month against the euro and dollar, and in light of the low inflation outlook, it is not inconceivable that the Bank of Israel will surprise today and lower the interest rate by 0.25%. If the Bank of Israel again avoids doing so, as it did last month, this will only accelerate the falls of the shekel-dollar and shekel-euro rates to new lows."
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