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Investing.com - UBS has revised its quarter-end USD/ILS forecasts downward through 2Q26, citing a significant reduction in the geopolitical risk premium embedded in the currency pair that has triggered a rally in the Israeli shekel.
The Swiss banking giant now projects the USD/ILS exchange rate to reach 3.30 by the end of the current quarter and remain at that level through the following quarter, before declining to 3.25 and ultimately 3.20 through the second quarter of 2026. These forecasts represent a substantial downward revision from previous projections of 3.55, 3.50, 3.50, and 3.50 respectively.
UBS attributes its more bullish outlook on the shekel to several factors, including Israel’s economic fundamentals, the cautious stance maintained by the country’s central bank, potentially increasing USD hedge ratios, and broader weakness in the U.S. dollar.
The bank identifies ongoing war and security dynamics as key downside risks to its forecast. Additionally, any steps toward meaningful judicial overhaul could weigh negatively on the shekel’s performance.
UBS also notes that developments in the U.S. economic outlook remain important factors for the currency pair, as stronger U.S. economic activity or inflation that keeps the Federal Reserve on hold could lift USD/ILS, while equity market volatility could put pressure on the shekel.
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