Dear Reader,

Today's overview of economic news and market action

• As expected, the ECB voted to cut its key deposit rate by 25bps yesterday …
• The market reaction to the ECB meeting outcome was limited, including for the euro …
• Elsewhere, the dollar was on the defensive overnight …
• This sees EUR/USD open this morning in the top half of $1.10-1.11 …
• GBP/USD is changing hands above $1.31 …
• EUR/GBP is operating down in the lower half of 84-85p …
• Today, Eurozone industrial production data for July are due …

All rates quoted are indicative market rates.

ECB cuts as expected, but vague guidance on rate outlook

The ECB cut interest rates for a second time this year at the September policy setting meeting of its Governing Council. The Deposit rate was lowered to 3.50%. Meanwhile, the refi rate was cut to 3.65%, which entailed a previously announced technical adjustment of a reduction in the spread between the Depo and Refi rates from 50bps to 15bps. 

The headline AIB Ireland Manufacturing PMI® edged up to its highest level since February and signalled a marginal overall improvement in business conditions. An upturn in manufacturing sector performance mostly reflected sustained production growth and a faster rise in employment numbers. Survey respondents often commented on efforts to boost capacity in line with long-term business expansion plans.

Irish services activity continued to rise solidly in August, AIB PMI® survey data indicated. Growth of both new business and employment accelerated, and outstanding work increased at the strongest rate in nearly a year. Less positively, the overall 12-month outlook was the weakest since November 2022.

House prices continue to trend sharply higher. They were up 8.6% YoY in June. Consumer prices rose by 0.2% in July, amid further increases in transport and hospitality costs. Revisions to the data show the unemployment rate averaged 4.4% in Q2’24 up from 4.3% in Q1’24. The preliminary reading indicates GDP expanded by 1.2% in Q2’24, but it remained 1.4% lower in YoY terms.