Brazilian Real to Israeli Shekel (BRL/ILS) Exchange Rate Forecast to Strengthen despite Weak Brazilian Retail Sales

The Brazilian Real softened versus most of its major peers on Tuesday after retail sales in April declined. On an annual basis, Retail Sales dropped by -3.5%; a much larger declination than the -1.6% markets anticipated. On the month, Retail Sales dropped by -0.4% despite predictions of a 0.7% increase. The drop in sales has been linked to the prospect of recession which has undermined confidence. ‘It was a negative surprise, but it is not as weird in terms of the scenario we’re living in,’ said Jankiel Santos, chief economist at BESI Brazil. ‘It’s really widespread, which tends to show me that it’s the effect of credit, income level and consumer confidence. All of these just going in the other direction instead of expansion.’

The deceleration in retail sales could be seen as a positive from the central bank’s perspective, however, with the need to bring inflation down to manageable levels. ‘Some deceleration in terms of economic activity is what the central bank wants to see to bring inflation down,’ BESI’s Santos said. ‘In Tombini’s shoes, he’s looking at that and saying we’re reaping the fruits of all the hikes we’ve been doing over the past year and a half.’

The Brazilian Real to Israeli Shekel (BRL/ILS) exchange rate was trending in the region of 1.2331 on Tuesday.

The Israeli Shekel dived versus nearly all of its major peers on Tuesday after the Central Bureau of Statistics published its second reading for first-quarter growth. Gross Domestic Product was negatively revised in the second estimate, dropping from 0.78% to 0.52%. First-quarter Annualised Gross Domestic Product was also revised lower from 6.6% to just 2.1%. Markets expected the annualised figure to drop to 2.5%. ‘The Central Bureau of Statistics said that first quarter growth reflects an increase in spending on private consumption, combined with decreases in exports of goods and services and investments in fixed assets,’ stated Globes online.

Another factor weighing on Israeli growth is the ongoing conflict with Palestine. The American research institute Rand Corporation published a study which showed that a two-state solution could benefit Israel by $120 billion (USD) over a period of 10 years. In accordance with Rand, Israel would be much better off following a comprehensive peace agreement, but they must first agree to the division of the Holy Land. ‘We hope our analysis and tools can help Israelis, Palestinians and the international community understand more clearly how present trends are evolving and recognize the costs and benefits of alternatives to the current destructive cycle of action, reaction and inaction,’ said C. Ross Anthony, co-leader of the study and director of RAND’s Israeli-Palestinian Initiative.

The Brazilian Real to Israeli Shekel (BRL/ILS) exchange rate was trending within the range of 1.2237 – 1.2366 on Tuesday.