Dollar Strengthens, Shekel Weakens Ahead of Bank of Israel's Key Decision
Translated & summarized from Maariv by baba
The Israeli shekel weakened against the dollar as the country prepared for the release of its October CPI data, which is expected to show a monthly increase but a slight decrease in annual inflation. This data will influence the Bank of Israel's upcoming interest rate decision. Meanwhile, global economic factors, including rising U.S. Treasury yields and U.S. producer price data, are strengthening the dollar and fueling expectations of a U.S. Federal Reserve rate hike. The Israeli stock market also saw declines, mirroring a downturn in U.S. tech stocks.
The story in 5 lines · by baba
- Israel's October CPI is expected to rise 0.2%-0.5% monthly, potentially lowering annual inflation to 1.4%-1.6%.
- The Israeli shekel weakened against the dollar, reaching 3.2111 shekels.
- Third-quarter economic growth in Israel is forecast to be between 4.5% and 6% annually.
- U.S. producer prices rose 0.3% in October, increasing expectations of a Fed rate hike.
- Nvidia's stock fell nearly 13% last week ahead of its earnings report.
The Israeli shekel weakened against the dollar, with the dollar reaching 3.2111 shekels. This comes as Israel's Central Bureau of Statistics is set to release the October consumer price index (CPI) on November 15th. Forecasts predict a monthly increase of 0.2% to 0.5%. Despite this potential monthly rise, the annual inflation rate is expected to decrease slightly from 1.6% to a range of 1.4% to 1.6%. This annual decrease is attributed to the fact that the higher inflation rate from October of the previous year will be removed from the 12-month calculation.
The shekel's weakening occurred alongside a broader market downturn, with the Tel Aviv 35 index falling 0.88% and the Tel Aviv 90 index dropping 1.39% on the last trading day. Bond yields also saw movement, with the yield on 10-year Israeli government bonds rising approximately 0.07 percentage points to around 4.18%.
Economists are also anticipating the first estimate of Israel's third-quarter economic growth, projected to be between 4.5% and 6% annually. Yossi Menashe, Joint CEO of Altshuler Shaham Financial Services, suggested that exports of foreign-manufactured goods might inflate the overall growth figure, while domestic activity is expected to show more moderate growth due to weaker consumption.
Globally, the dollar index strengthened by 0.23% against a basket of major currencies. Menashe attributes this to rising yields on U.S. Treasury bonds, which have made American debt more attractive and increased demand for dollars. In the U.S., producer prices in October rose 0.3%, slightly below expectations, but the annual rate climbed to 6.5%. These figures fuel market expectations that the U.S. Federal Reserve might raise interest rates in December.
Wall Street experienced a decline, particularly in the semiconductor sector, with the Nasdaq falling 0.91% on Friday, though it gained 2.27% for the week. Nvidia lost about 2% on Friday, closing at $162.85, and ended the week down nearly 13% following the resignation of its founder and CEO, Jensen Huang. Investors are now awaiting Nvidia's earnings report on Tuesday for clues about future demand for its AI chips.
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