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Israel's Supreme Court and the "Reasonableness Clause": Issues and Impacts on the National and International Economy
Israel's supreme court will examine the validity of the "reasonableness clause" tomorrow. Although this subject has been widely discussed in the media, homes and cafés for months, what impact could it have on the price of the Shekel? This historic moment for our little country is taking shape against an international backdrop with just as much at stake, as central banks the world over do their utmost to reduce inflation and avoid an economic slowdown.
Starting tomorrow and continuing for around four months, fifteen judges from Israel's Supreme Court will assess the electoral law passed in July. The length of this process and the format of its outcome are uncertain. Many dramatic situations can be expected from both the judges and the government, which will inevitably seek to reach an agreement with certain members of the opposition in order to maximize its chances of strengthening the law.
Currency Fluctuations and Legal Issues: The Impact of Israel's Supreme Court on the Shekel and the World Economy
This will generate as many surprises as currency fluctuations. At present, the market is expecting the worst to happen: a Supreme Court annulment of the government's authority over certain laws considered "anti-democratic", followed by a constitutional crisis, and then institutions essential to the economy completely floundering and unable to take critical measures to move the local economy forward. Given the low probability of this scenario occurring, we can therefore hope for a rapprochement that would also be felt on the financial markets should the law be definitively accepted or the government accept the Supreme Court's rejection.
At the same time, central banks around the world are threatening to continue raising their key interest rates in order to bring down inflation completely. As yields on currencies such as the Euro and Dollar rise, they attract large amounts of capital, which inevitably leaves emerging currencies such as the Shekel, due to their status as reserve currencies. The Shekel, after being the "world's strongest" currency for five consecutive years, has been devalued to the lowest rank among international currencies. The shekel's inevitable fall has been accelerated by the local economic environment, and by 2023 the shekel will be the weakest currency globally after the Russian ruble and the Turkish lira.
Do you have a question?Contact usAnticipating Fluctuations: The Shekel, the Euro and the Need for Monetary Protection
The fact remains that most of the bad news about the Shekel's price is incorporated into the rate. It's possible that the Euro, which has been considerably overvalued in recent months and is also in danger of losing altitude, will represent significant resistance to future advances in the EUR/ILS market. In any case, there has never been a more crucial and opportune time to protect yourself from fluctuations in the months ahead, with the right tools to avoid being too exposed to the elements.
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