Dear Reader,

Today's overview of economic news and market action:

• Equity markets fell yesterday on both sides of the Atlantic …
• Stock markets struggled amid a marked hardening in rate expectations ...
• Futures contracts firmed by around 10-20bps across the board …
• 2-year yields rose by 5-20bps as a result, led higher by short-dated UK Gilts …
• The outsized move in Gilts provided a supportive backdrop for sterling …
• This sees EUR/GBP open today back at 85.7p …
• Elsewhere, EUR/USD is in the top half of $1.09-1.10 …
• Today, the ECB meeting minutes from December are due …

Markets May Be Overly Optimistic on Rate Cuts

Further significant declines in headline and core inflation rates look to be in store this spring virtually everywhere, as large price increases a year earlier drop out of the annual comparison. 

Further Marked Fall in Inflation Needed for Rate Cuts

Further significant declines in headline and core inflation rates look to be in store this spring virtually everywhere, as large price increases a year earlier drop out of the annual comparison.

World economy grew at a very modest pace in 2023. Subdued growth expected again in 2024, with continuing weak performance by most advanced economies in particular. Inflation fell sharply last year and further moderation in price pressures anticipated in 2024.

Renewed downturn in manufacturing order books, but business optimism improves slightly

The AIB Ireland Manufacturing PMI® pointed to worsening business conditions as 2023 drew to a close, representing a setback after the stabilisation seen during November.

Service sector expansion sustained in December as business outlook for 2024 improves

The December AIB PMI® survey data signalled a further rise in service sector activity, extending the current growth sequence that began March 2021.