As Tensions Persist on the Iran Front, the Dollar Eases Slightly and Trades Around NIS 2.97

Minor moves were seen in currency markets, in Israel and abroad, against the backdrop of continuing tension on the Iranian front. In the local market, the dollar weakened by 0.2% and was trading around NIS 2.97. The euro was unchanged at NIS 3.43. In global markets, the dollar index showed no significant change at 99.9 points, the euro rose 0.1% and was trading above $1.15, and the pound rose 0.1% and was trading around $1.34.

The U.S. military attacked a series of targets in Iran overnight, between Wednesday and Thursday, for the second night in a row. This came after explicit threats by President Donald Trump to attack again overnight in the Islamic Republic. The wave of strikes lasted about four hours, and at its conclusion U.S. Central Command (CENTCOM) said it had struck military surveillance capabilities, communications systems and air defense sites across Iran. As happened yesterday, Iran responded again this morning with launches toward Gulf states.

After the U.S. published yesterday the May consumer price index, according to which annual inflation stood at 4.2%, Gargi Chaudhuri, BlackRock’s chief investment strategist for the Americas, said, 'Overall inflation remains elevated due to rising energy prices, but the easing in housing and services inflation indicates that underlying price pressures continue to weaken. While strong labor market data have reduced expectations for rate cuts in the near term, we still do not see evidence that higher energy costs are feeding through into broader core inflation.'

The Federal Reserve will meet next week, on June 17, for its interest rate meeting, the first under incoming chair Kevin Warsh, and no change in rates is expected at this meeting. Given the high inflation, a rate cut is probably not on the table in the near future, and the market is in fact pricing in a Fed rate hike at the December meeting.