JPMorgan Predicts Shekel Volatility Ahead of Israeli Election

Analysts at JPMorgan estimate that Israel's upcoming election on October 27 could cause the shekel to fluctuate by as much as 3% in either direction. In a report published Thursday, the bank argues that current market pricing, which implies only a 1% move, is too low given the potential for political volatility.

The bank assigns a 55% probability to a victory by opposition leader and former military chief Gadi Eisenkot. Such an outcome could strengthen the currency by 2% to 3% as concerns over institutional reforms ease. Conversely, a victory for Prime Minister Benjamin Netanyahu could lead to a 3% drop in the currency's value.

While major economic policy shifts are unlikely, the report suggests the election result will influence Israel's relations with Western allies and international perceptions of judicial reforms and policies in Gaza and the West Bank. The First International Bank of Israel may provide resistance to excessive currency strength.