Dear Reader,

Today's overview of economic news and market action

• There was a mixed tone to investor sentiment yesterday …
• On the monetary policy front, Chair Powell struck a balanced tone in testimony to congress …
• Meantime, sovereign bond yields moved higher across the board …
• Currency-wise, the dollar was under some downward pressure …
• This sees EUR/USD open today in the top half of $1.03-1.04 …
• GBP/USD is near the midpoint of $1.24-1.25 …
• EUR/GBP remains in the lower half of the 83-84p range …
• Today, the main release of note will be US CPI inflation for January …

All rates quoted are indicative market rates.

Central banks to proceed with caution

With all three major central banks acting as expected in their first monetary policy meetings of 2025, it’s worth taking stock of where each stand and what the market outlook is for interest rates. To recap, the US Fed held rates at current levels at its meeting, while both the ECB and Bank of England (BoE) cut by 25 basis points (bps). This leaves the Fed at 4.50-4.75%, the ECB Deposit Rate at 2.75% and the BoE at 4.50%.

The AIB Irish Construction PMI survey for January showed a weak start to the year for the sector. The headline index fell back into contractionary territory, with a reading of 48.2 in January, down from 51.6 in December. This is the fourth time in five months that the index has been below 50, highlighting the subdued backdrop for building activity. However, adverse weather conditions in the month, especially Storm Éowyn had a dampening impact on overall construction levels.

The latest AIB Ireland Services PMI® survey indicated a soft start to 2025 for the Irish services economy. Growth of new business and total activity were maintained, but at the weakest rates in nine and four months, respectively. Outstanding work barely rose and employment was broadly unchanged, with job cuts recorded in financial services.

2025 commenced on a solid note, with the Irish manufacturing sector recording an improvement in operating conditions for the first time in three months. Fresh expansions were noted for both new orders and output. More positively, confidence for the year ahead outlook remained strongly optimistic, with many businesses planning to expand capacity.