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The IsraTransfer Report - May 2019

Monetary policy takes center stage in both US dollar and sterling trading as May comes into bloom; with fears of a global economic slowdown beginning to sprout.

From the IsraTransfer Trading Desk

Apparently all those "April showers" must have really softened up the ground the USD/NIS had been sitting on.  After showing some good support at the 3.60 level to close out the month of March, the rate found itself sinking down to 3.55 by the middle of April.  Thankfully, a late rally in the US dollar to close out the month came to our rescue, as USD/NIS rate finds itself once again back up in the 3.61 range.  A  weaker US dollar despite recent strong GDP, plus a likely no-change by the US Federal Reserve at its upcoming interest rate decision later this week, certainly doesn't bode well for renewed greenback strength.  On the flip side, if you factor in the just released personal consumption expenditures (PCE) data showing the slowest price growth in a year (a possible fore bearer of a slowing global economy) we could be looking at money pouring into the US dollar as investors seek the safety of the American currency.  As a result, with all these new potential needle-moving variables we are shifting to a more cautious approach on the USD/NIS in the month to come and not opposed to converting US dollars to shekels while the rate is above 3.60.

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In sterling trading we still have no signs of a Brexit resolution so focus will shift to interest rates this week.  With the Bank of England scheduled to announce its latest decision on Thursday we should get a better idea of whether it is prepared to increase short-term interest rates as it looks to further normalize its monetary policy.  From a technical trading perspective, the GBP/NIS experienced a somewhat precipitous drop in the April from the 4.74 level that it closed out March.  Having spent the month of April going sideways, the rate finds itself trading in a tight range between 4.65 and 4.67.   At this point, and with no Brexit resolution still in sight to move the fundamentals one way or the other, a trip back up to retest the 4.70 mark might be the best we we'll see over the next month of trading.

Betting the House on It?

Is trouble knocking on the front doors at Israel's banks?  According to global debt ratings service, Standard & Poors, it just might be should the housing market take serious turn for the worse. Since posting a level of 32% back in 2006, credit exposure in mortgages, construction, and real estate now accounts for nearly half of all of the Israel banking sector's total credit!  

While the whopping amount of leverage that Israel's banks have invested in real estate does present substantial risk, S&P was quick to point out that the country is still in better shape when it comes to residential real estate credit than its European peers. That said, considering the decline in new home construction, along with housing prices, the ratings agency does warn that with a higher concentration of leverage also comes more continued ongoing risk, so it's something we should and will continue to keep an eye on.

Looking to get that one last trade in before the weekend?  Well, good news, because now you can trade on Fridays from 9am to 11am IST thanks to online client access using

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Giving More Credit Where It's Due

In taking a proactive step to help lower loan costs for Israel's households and promote competition in the country's credit market, Bank of Israel officially unveiled its first consumer credit database system.  Using data reported by credit lenders including banks, credit card companies or non-bank credit providers, the system collects data regarding the credit and repayment history of individuals, citizens and residents of Israel over the age of 18. 

For those concerned about privacy, unless and individuals personal assets have been used as collateral for a loan in the past, neither those nor personal income information will be collected by the system.  Prior to the introduction of this new service a borrower's past credit problem were the only areas of someone's credit history that was generally available to lenders.  Unfortunately, while this may have been successful at shielding lenders from bad credit risks, it prevented those with good credit histories from being able to access loans with better terms.

For more information on the Bank of Israel's new consumer credit database system, visit their new website now.

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