Dear Reader,

Today's overview of economic news and market action

• Investors continue to digest US tariff related newsflow yesterday …
• The most recent developments provide some hope that full blown trade wars may be avoided …
• Against this backdrop, equity markets moved higher and the dollar was on the defensive …
• Overall, the greenback shed 0.7-0.9% versus the euro and sterling yesterday …
• This see EUR/USD open today in the top half of $1.03-1.04 …
• GBP/USD is in the upper region of $1.24-1.25 …
• EUR/GBP remains above 83p …
• USD/JPY is down near the ¥153 threshold …

All rates quoted are indicative market rates.

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.

ECB cuts again, with another cut on the cards for March

The first ECB Governing Council policy setting meeting of 2025 saw the central bank cut interest rates. It reduced them by 25bps, with the Deposit rate lowered to 2.75%, while the Re-fi rate was decreased to 2.90%. This marked the fifth 25bps rate cut since the ECB commenced its easing cycle in June of last year. Today’s decision by the ECB to cut rates was unanimous. 

Fed in no hurry to cut rates

The first meeting of the US Federal Reserve Open Market Committee (FOMC) for 2025 saw the central bank leave policy on hold. The target range for the Fed funds rate was maintained at 4.25-4.50%. The decision by the FOMC to leave rates unchanged was unanimous and very much in line with market expectations. This was the first time in four meetings that the Fed did not cut interest rates, having previously reduced rates by 100bps over the course of its last three meetings in 2024.