Another slight decline in the dollar - trading at 2.99 shekels

Another slight rise in the shekel, continuing the trend recorded yesterday, was observed at the opening of the foreign exchange week: the dollar is down by 0.2% and is trading around 2.99 shekels. The euro weakened by 0.3% and is trading above 3.45 shekels.

In global markets, one day before the publication of US inflation data, the dollar index against a basket of leading currencies remains without significant movement at 99.8 points; the euro is stable above 1.15 dollars, and the pound is stable at 1.35 dollars. There was also slight movement for the yen after a significant retreat yesterday, with the dollar trading at 159.2 yen.

Rafi Gozlan, chief economist at IBI Investment House, noted in his weekly review:

«The sharp rise recorded in export activity reduces to some extent the pressure for action by the Bank of Israel - as does the exchange rate of the shekel. Confirmation of this was also received from the Bank of Israel's activity data in the foreign exchange market for July - the bank did not make purchases last month, after intervention in a cumulative volume of about 1.8 billion dollars in May-June».

Ahead of the US inflation data release, President Donald Trump confirmed yesterday that he had recently spoken with Fed Chair Kevin Warsh, but denied reports of numerous conversations. The Wall Street Journal reported last week that Trump and the Fed Chair had spoken several times since Warsh took office in May of this year. Trump stated that the report is incorrect, but confirmed that the two were in contact «once, briefly, a few days ago».

Meitav economist Alex Zabezhinsky notes that the sharp increase in corporate efficiency in the USA may be a deflationary factor:

«The growth rate of labor productivity in the USA continues to grow, as evidenced by the second-quarter data published last week. The source of the efficiency is the almost complete stagnation in the number of working hours, despite the continued growth in output. The main impact of AI is not necessarily the firing of employees, but a significant slowdown in hiring new employees. Such a prolonged stagnation in the number of working hours, not during a recession, has not been recorded in the USA at least since World War II. The fact that output continues to grow without an increase in working hours points to significant technological efficiency, with an intensity not seen in the last 80 years».

This development, says Zabezhinsky, will have an impact on US price levels:

«The process by which companies increase output without increasing the number of employees is expected to moderate price pressures from the supply side - after they recently rose due to the war, tariffs, and the demand created following accelerated investments in AI infrastructure. The moderation of inflation is also expected to be contributed to by the fact that the economy outside the field of AI investments is growing at a low rate or even contracting - as reflected in the labor market, the real estate market, and other investments outside the field of AI».