The shekel has come out of the gates with a remarkable showing that has led to the currency trading at its strongest levels against the US dollar in three months, and versus the Euro in two.
From the IsraTransfer Currency Trading Desk
We see its strength against the USD due to a general weakening in the American currency across the board as the market prices in skepticism of future US FOMC interest rate hikes, plus a renewed investor tolerance for more speculative global currencies. Additionally, the seemingly open-ended US government shutdown is also weighing on the dollar. With a handful of Bank of Israel interest rate hikes expected over the course of 2019 we believe the the shekel will trend stronger against the US dollar and other world currencies as year goes along. That said, given the Shekel’s somewhat over-performance during these past two weeks we think that some weakening is probably in the cards, and a higher USD/NIS exchange rate to go along with it. Maybe something worth taking advantage of?
In Sterling and Euro trading it’s once again all about Brexit as the main driver dictating the trends for both GBP and EUR. The situation is once again no closer to a resolution following British Prime Minister May’s resounding defeat Tuesday night on her resolution vote. In fact, the 230 vote loss actually marks the largest loss on a Parliament vote in modern times! As a result, once again May’s job security has been put into question, with Labour’s Jeremy Corbyn calling for a no-confidence vote in the hopes of ousting his opponent. Should May prevail (as expected) she’ll once again be on the clock to produce a new resolution, this time with a Monday deadline.
Not surprisingly all this uncertainty is no friend to either currency, although Sterling has shown some recent strength on the wake of the most recent turmoil. Plus, with the familiar collection of outcomes back on the table, including a new general election, a no deal Brexit, a deferred Brexit, or even a second referendum, don’t expect the roller coaster to end anytime soon. All things considered, and given our opinion mentioned above of a stronger shekel over the long-term, we are not opposed to taking advantage of any weakness in the shekel against both the GBP and EUR to convert either currency to NIS.
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The Economy on Ice
A winter chill wasn’t just in the air to close out the year, as the economy received some frosty news of its own when it came to growth in 2018. After scorching its way to 4% growth in 2016, things have since cooled off a bit to 3.5% in 2017, and now 3.2% in the past 12 months. Other less-than-stellar data included basic household expenses climbing by 1.3% per capita, as well as the export of goods and services dropping down 1.1% from 2017.
Not all the news was negative, however, as even with the decline from last year’s number, Israel still occupies the OECD’s top spot when it comes to GDP. Additionally, personal spending warmed back up to above 2% in 2018 from 1.4%, and the Ministry of Tourism reported a whopping 14% increase in visitors to Israel generating over 20 billion shekels in revenue!
Immigration to Israel kept up its impressive pace in 2018, as those making Aliyah increased by another 5%, an increase of nearly 30,000 people from 2017. Russia led by far and away as the country of origin with 10,500 new Olim, accounting for a 45% jump from the year prior. Immigration to Israel from North America also held steady posting 3,500 people for the second year in a row.
Despite immigration of 6,500 Olim from the Ukraine, the number actually represented a drop of 6% from 2017, although France actually produced the largest drop percentage-wise with just 2,600 newcomers, or a decline of 25% from a year ago.
Tax All Folks
Apparently super-model Bar Rafaeli isn’t the only Israeli that international tax authorities, including Israel’s, plan to have their eyes on when it comes to tax evasion. In an attempt to get out in front of potential damage to its reputation by being placed on the OECD and G20 nations’ list of countries not complying with its tax planning rules, Israel has taken the step in joining the participants of Automatic Exchange of Information (AEOI).
This new global standard designed to help uproot previously undetected tax evasion calls for non-resident financial information to be provided to the account holders’ country of residence. According to some estimates could affect as many as one million bank customers in Israel alone. Although, the implementation is not expected to go fully into action until 2020, as always, we advise checking with your tax professional to see how this could impact you.