Israel’s Leading Indicator Rises as USD/ILS Pressures Trend Line
- Composite State of the Economy Index increases 1.0% in November
- Unemployment stands at 5.6%, down 0.1 pp from October
- Terms of Trade Index increases 1.0%
Noting a moderate recovery in economic activity following operation protective edge, the Bank of Israel held interest rates at 0.25% during their November meeting. Indicators that have since become available—composite index, labor force survey, and foreign trade position—have reflected continued economic improvement ahead of next week’s rate decision.
Israel’s Composite State of the Economy Index increased 1.0% in November, indicating forward movement in real economic activity. The cyclical indicator was positively impacted by an increase in the number of job vacancies (+2.81%) and hindered from further improvement by a decline in the value of goods (-3.3%) and services (-1.9%) exported.
Labor market conditions improved, with unemployment down to 5.6% in November after measuring 5.7% in the month prior. The number of labor force participants was 3.822 million; 3.067 million were employed while 215,000 remained unemployed. This equates to a 0.4 pp increase in the labor force participation rate among those workers aged 15 and older and a 0.6 pp increase among those aged 25-64. Among the latter age group unemployment remained the same at 4.8%.
While a fall in import prices hindered the economic outlook, the overall terms of trade index still increased by 1.0% in the third quarter (exc. ships, aircraft, fuels and diamonds). With these exclusions intact, import price indices decreased by 0.9% in Q3, while the export price indices remained unchanged.
The USDILS is pressuring the trend line that has held this strong uptrend for the past 5 months. Emerging markets in general, will still have a lot to process if the Fed continues along its path to hike rates in the US. That will keep the pressure longer term on driving the USDILS exchange rate higher. A break outside of the pink trading range will indicate the near term trend. A break above 3.95 would suggest the US Dollar will continue its trend. A move below 3.88 suggests the trend is likely to pause and correct this large move.
USD/ILS Daily Chart
Chart Created by Jeremy Wagner
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