Shekel appreciated on possible cease-fire deal and sale of Wiz to Google

ISRAEL - In Brief 15 Jul 2024 by Jonathan Katz

---

Geopolitics: Cease-fire negotiations are underway as hostilities continue. On Saturday, Israel targeted Muhammed Deif, the Hamas military chief, regarded as number 2 in Hamas (after Sinwar). It is not clear how this assassination will affect negotiations. Meanwhile, missile attacks from the North continue. Fiscal deficit pushes higher The fiscal deficit reached 7.6% GDP in the last 12 months to June. Tax revenues continue to surprise on the upside. At this point, we expect a fiscal deficit of around 7% GDP this year, not far from target. Markets will be more focused on fiscal adjustments necessary to reduce the 2025 deficit. So far, the cabinet has yet to address this issue. The BoI reduces its rate cut forecast Policy rates remained on hold last week as expected. The hawkish slant was expressed in the rate forecast of the BoI Research Department, reduced to one cut by the second quarter of 2025, previously three cuts by Q125. This forecast assumes elevated geopolitical risks for all of 2024. A possible cease-fire could renew expectations regarding loosening. New home sales increased by 4% m/m (SA) and by 73% y/y, while existing home sales increased by 8% m/m and by 33% y/y. The rebound in housing demand is due in part by the expectation of lack of housing inventory going forward due to the sharp decline in workers. We expect rentals prices to increase as well. Merchandise exports are up 0.7% q/q in Q224 (trend), while imports increased 3.4%. Imports of consumer goods are up 6%, an indicator of strong private consumption demand. The CBS Consumer Confidence Index remained low and stable at -27 in June, down from -18 before the war, as the war drags on. FX: The shekel ap...