Despite the heavy shelling on the Lower Galilee, optimism regarding a potential imminent hostage deal and cease-fire appears to outweigh concerns in the stock market, as the Tel Aviv Stock Exchange showed great optimism on Sunday when most stock prices surged significantly.
At the close, the TA-35 index rose by 2.3%, the TA-125 by 2.7%, TA-Banks by 3.2%, TA-Real Estate by 5.5%, and TA-90 by 4.1%. The yield on 10-year government bonds fell by 20 basis points to 4.86%.
Meanwhile, the Bank of Israel's interest rate decision is expected on Monday, with most analysts from banks and investment houses predicting that the rate will remain unchanged. However, the governor of the Bank of Israel may hint at a potential rate cut later in the year, possibly by the end of the summer.
The reasons for not lowering the rate on Monday include the state's significant budget deficit, the pending government decisions on formulating a plan for cuts and tax increases as part of the 2025 budget - which are expected by the end of the month, the ongoing war in the southern and northern fronts, fears of a more severe escalation soon at the Lebanon border, and the fact that interest rates have not been cut yet in the U.S. and many other countries worldwide.
The Bank of Israel was the first in the Western world to cut the interest rate by a quarter of a percent on January 1, following significant increases over the past year and a half globally.
The market now awaits explanations from Bank of Israel Governor Professor Amir Yaron. Therefore, forex trading will be influenced on Monday by the anticipation of the Bank of Israel's announcement, as will stock market trading, which may fluctuate based on the Bank of Israel's statement at 4 p.m. Monday, just before the end of the trading day. The strengthening of the shekel over the weekend might give the Bank of Israel some maneuvering room in its interest rate decision, but the likelihood of lowering the rate below 4.5% remains low.