Global economy has proven to be robust in 2025 despite ongoing geopolitical uncertainty.US growth increasingly imbalanced toward AI investment, with the consumer and labour market weakening. Fed and Bank of England set for further cuts as the ECB sits on the sidelines. Bank of Japan pivoting towards a hawkish stance. Dollar set for weakest year since early 2000s but currency has regained some lost ground during Q4 2025 and further modest upside for euro, while sterling could remain on the defensive amid a challenging macro environment.

This Budget is set against an uncertain economic backdrop so far this year. GDP growth was robust in the early part of the year but has since moderated. The Chancellor had committed to not raising taxes materially further following last year’s hikes to national insurance (NI) on employer contributions, which among other measures raised £40bn. While the tax rises are largely to fill the hole in the fiscal rules, there are also net spending increases in the budget.

Manufacturing PMI edged slightly lower to 50.9 in October. The services PMI jumped to 56.7 in October, a ten month high. Core retail sales rose by 0.8% in Q3. Housing commencements 12 month running dropped further to 23.5k in October. House price annual inflation inched up to +7.6% in September. HICP inflation rose to 2.8% in October, amid increases in education and food prices. Goods exports up by 60.8% YTD in September, led by a sharp increase in pharma exports (+66.2%)  and 12 month rolling Exchequer surplus widened to €10.6bn in October.

The November meeting of the Bank of England's Monetary Policy Committee (MPC) saw the central bank maintain the Bank Rate at 4.00%. This was the second consecutive meeting that the BoE Kept rates unchanged and was in line with market expectations. It also brings an end to its recent practice of lowering rates at meetings that correspond to the publication of its quarterly Monetary Policy Report (MPR). 

The October meeting of the ECB's Governing council saw the central bank leave interest rates on hold. This was the third successive meeting that the central bank left its official retes unaltered. The deposit and refi rates were maintained at 2.00% and 2.15%, respectively. 

The Federal Reserve Open Market Committee (FOMC) meeting for December saw the central bank cut interest rates by 25bps, with the target range for the Fed funds rate lowered to 3.50-3.75%. This was the third rate cut from the central bank in 2025, totalling 75bps. The decision to cut rates by 25bps was in line with market expectations. However, the voting breakdown showed some differing views within the FOMC. Three members dissented, the highest in six years.

As we reach the halfway mark of 2025, the Irish residential property market continues to be defined by a shortfall in supply. The CSO completions data, which is the official measure of new supply indicate, a disappointing performance over the last year from the residential construction perspective.

Historic FX & Interest Rates for 2024 ....

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