Markets, Housing and Construction in Focus

Join Jane Kavanagh from AIB’s Corporate Treasury desk, alongside John Fahey, Senior Economist, and Pat O’Sullivan, Head of Real Estate Research, for this edition of AIB Market Talk. The discussion explores recent global market developments and what they mean for Ireland’s construction, housing and real estate sectors.

In this episode, the panel discusses:

• The impact of geopolitical tensions on global markets, including energy prices, inflation expectations, interest rates and currency movements 
• Diverging signals across financial markets, with equity markets showing resilience while interest rate markets continue to price inflation risks 
• What the latest Irish Construction PMIs reveal about activity levels, new orders, employment trends and sector confidence 
• Developments in the Irish housing market, including price trends, regional differences, supply constraints and affordability pressures 
• Progress on housing supply, with a focus on apartment construction, government policy interventions and planning reforms 
• The role of the National Development Plan and infrastructure investment in supporting future housing delivery 
• Supports available to first-time buyers and what the medium-term outlook looks like for housing supply and demand

Read the AIB Ireland Construction PMI® here.

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Transcript

SPEAKER_01 0:04

You're listening to AIB Market Talk, bringing you financial market insights from AIB's experts.

SPEAKER_02 0:11

Hello, and welcome to our AIB Market Update, which we are recording today, the 23rd of February, 2026. I'm Jane Kavner from our corporate treasury desk, and I'm joined today by John Fahy, Senior Economist with AIB and Patra Sullivan, our head of real estate research with the AIB Real Estate Finance team, where we are going to discuss the financial markets but also on this pod focus on the construction, real estate, and housing markets. But John, I'm going to come to you first, where I think it's probably a bit timely just to provide our listeners with a quick update on the crisis, the conflict in the Middle East.

SPEAKER_00 0:44

Yeah, well, obviously it's a conflict war situation, so things can change on a daily basis. But where we are at the moment is we've seen the uh ceasefire extension announced earlier this week by President Trump. But I think if you take a step back, uh what that does imply is that the US is looking to de-escalate the situation. Uh, and if you think back to a few weeks back when we had the first round of talks, fairly high-level contingent from both sides would also suggest that, you know, despite what's been said publicly, especially by the Iranian side, is that, you know, in terms of the underlying trend here, there does seem to be a step to de-escalate. But nonetheless, we are in a war situation, so escalation risk remains uh very much to the fore. And we've seen that recently in the last 24 to 48 hours in terms of the Strait of Hormuz and some tensions and issues uh around that. But we've kind of moved from a war situation to an economic war at the moment with with the blockade, both in terms of the Iranian blockade and and the US blockade uh of the strait.

SPEAKER_02 1:42

That uncertainty still persists, John. I mean, the lack of progress with the talks earlier this week has seen oil today, the 23rd, go back above$100 per barrel. How high did it get over the conflict?

SPEAKER_00 1:55

So, well, previously we've been above$110 per barrel. So anytime it goes above$100 is significant. What we have seen is that uh obviously when the news has turned more positive, there's been de-escalation. We did get back down below$100 per barrel, uh, and it broadly traded in$94 to$100 range. Now, the very temporary reopening announced uh last week by Iran in terms of the strait did see it briefly dip below$90 a barrel, but for much of the last while it's been in a$94 to$100 range. But as you say, the attentions over the strait and the uncertainty, uh it's got above$100. I think it's important though that given the specifics around the announcement by the US, it's it's a fairly open-ended timeline to that ceasefire. And also it was confirmed, so there was some speculation that it was only going to be for three to five days. But the Trump administration did come out and confirm that it was for longer than that. If that hadn't been in place, I think we could have seen a further uh push higher in oil prices and more uh nervousness and more uh impact uh on markets generally. So while there's been a bit of risk aversion in markets, it could have been a lot worse absence of a of a ceasefire being extended.

SPEAKER_02 3:03

That touch is significant for a lot of our customers, John, given that what is it, 30% of internationally trade fertilizer travels through it and 20% of the the seaborne oil is.

SPEAKER_00 3:14

Yeah, roughly a fifth of oil uh goes through that strait. So it's it's it's critical. But also the big part is is not just the strait, but it's the damage to the uh energy infrastructure in other Gulf nations, uh, and that could take a period of time to repair. So that's also having an impact. But if you think of where we were before the war uh started, you know, oil was in a$60 to$70 range. It was starting to move above 70 as we got closer to the start of the conflict, uh, but we're still some ways away from that at the moment.

SPEAKER_02 3:42

And obviously, John, all of this has impacted the markets where you know at the beginning of the year, markets are pricing in interest rate cuts. Now, this has quickly unfolded to interest rate hikes pretty much across the board. Tell us a little bit about how the Internet markets have evolved as this conflict has unfolded.

SPEAKER_00 3:59

Yeah, it's been interesting because if you look across some of the key asset markets, there's been a bit of a differing view in terms of where this conflict is going. If you if you look at equity markets, first of all, you know, SP 500 last week uh registered a few new record uh all-time highs. And, you know, over the course since the conflict has started, the SP is up over uh 3%. So what that tells you is that equity markets uh investors are taking the view that there will be a near-term resolution to this. Whereas in contrast, if you look what's happening in interest rate markets, they're still pricing in a more prolonged crisis because of the inflationary shock coming from it. So we're still seeing rate hikes being priced in. Now it's not as uh aggressive as was priced in in the early part of March. But if you look at the Eurozone, you know the market's still pricing in nearly two rate hikes, 50 base points in total, uh, similar uh in terms of the UK, and in the US it's not expecting any rate cuts this year. And contrast that to at the start of the year and previous discussions we've had on these podcasts where in the Eurozone the expectation was no rate changes at all. Uh in the US, 25 to 50 base points of rate cuts, and in the UK, similar. So, you know, the market's gone from expecting, as you say, rate cuts to rate hikes, and that's because the focus in interest rate markets is on inflation and the energy price shock and how prolonged that can be. So there is a diverging view and opinion across asset markets. As I said, equity markets seem to be more of the optimistic tone, whereas interest rate markets are still pricing in hikes, which would suggest that interest rate markets are still more worried that it's going to be a more long, drawn-out process and therefore have a bigger inflationary impact.

SPEAKER_02 5:33

Yeah, you can see they have softened. I I saw there, the ECB, that 50 basis points you mentioned, that's in from only what 70 basis points maybe a week ago, and the Bank of England, the market's pricing 30 basis points, that's in from maybe 50 basis points.

SPEAKER_00 5:46

Yeah, the Bank of England was it was as high as 75 at one stage. The Bank of England was probably the most aggressive repricing we saw in the early part of the conflict. It went from nearly priced in 50 base points of cuts to 75. So it was nearly a swing of 125 base points in pricing. Now, just because it's priced in doesn't necessarily mean it's going to happen, but it's just highlighting the fact that interest rate markets, interest rate futures, uh investors there, market participants are focused on that inflation shock. So they're less optimistic compared to where we are on equity markets and the view there.

SPEAKER_02 6:17

And then, John, turning to the currencies, then the dollar obviously we saw a safe haven flow again once the conflict came about. Talk to us a little bit about the currencies over the world.

SPEAKER_00 6:26

Yeah, well, what's been clear since the war uh began is that it's oil prices the positive correlation with the dollar. You know, they're very much moved in train. So uh in the initial outset where we got that peak in oil prices, we saw Euro dollar trade down to a low near 114, 114, 12. So the 114 level held, but we got down close to it. What's happened is that over the course of the war, when the news has been more positive, or there's been signs of de-escalation, you know, Eurodollars recovered some ground. So we've tested back above 118. But as we've seen in the last uh few days of this week, the risk uh and the continued tensions and concerns over you know the Strait of Hormoose, as we talk now, Euro dollar is back below 117. So I think 118 is the key level. If things are going positively in terms of the the war and looks as if there's going to be a near-term resolution, Euro dollar trades back up to 118. But if things are concerns over an escalation, uh then we see quickly push back down and test below 117. So the 118 is a good level to keep out for. If Euro dollar is in or around or above 118, it suggests that the news is more positive than negative. Uh, but as we've seen in the last 48 hours, uh, as oil prices continue to move back up above$100, then we're seeing the dollar being positive correlated. That relationship has held, uh, and we're back testing below that 117 level. So really the dollar at the moment is moving very much in tandem what's happening in oil prices, and obviously, oil prices are moving very much dependent on the news flow and developments in relation to the Middle East conflict.

SPEAKER_02 7:58

We might look to unpack that a little bit further later on in the podcast, John, just in terms of looking further down the year. Turning the lens back to the construction sector, then, John Patty, I'm going to come to you in a moment in this as well. Uh, the latest PMIs were released on the 14th of April. What have they revealed about the overall health of the Irish construction sector?

SPEAKER_00 8:16

Yeah, so we've seen positive news. If you look over at the first quarter overall, in terms of the three monthly readings we've got, what it tells you is some renewed momentum over the course of the quarter. Uh, so total activity is back in expansionary territory for a second month uh in a row. So the key level you always look out for in the PMI's purchasing manager industry surveys is 50. Uh, and actually the the March reading of 53.2 was above February. So if you move further away from 50 on the upside, it it suggests uh quickening in the pace uh of growth. And just briefly, in terms of looking at the sectors, you know, there's three key sectors in it there's the commercial real estate, residential, and civil engineering. The best performing was was commercial real estate, but residential too also uh saw an acceleration. And indeed, uh the reading for March showed that the pace of growth there was at a one-year high. So a positive end to the first quarter uh on the housing side in terms of activity, uh, and that's been driven by you know, if you look across two new orders, which is regarded as a leading indicator, has been on the positive side, uh, and also employment levels have increased for fifth straight months. So, what that tells you is that construction firms remain fairly confident to be willing to take on more labour in terms of their pipeline. Uh, but before I hand over to Pat in terms of the more specifics, we did see some impact coming through in the survey from the Middle East conflict. So the survey tends to happen in the second half of the month. So the March did capture some of the period uh as the war with Iran uh escalated. And we saw two key areas where it started to impact within the survey data input prices. Uh so the cost inflation there is at its highest level since towards the end of 2022, and that's amid material shortages, but also higher fuel costs. So that's a direct read across from what's happening. And also, if you look at when the construction firms were surveyed on the outlook, whilst they remain optimistic uh on the potential for increasing activity levels over the next 12 months, that level of optimism, the strength there uh has fallen back, and the service specifically referenced the Middle East conflict as acting as a drag on confidence levels regarding uh sentiment.

SPEAKER_02 10:18

Thanks, John Pott. You're gonna tell us a little bit about what that looks like to us in the ground, for the want of a better word. You know, what does the house price trend look like in the Irish market at the moment?

SPEAKER_03 10:28

Sure. Um I suppose it's still worth pointing out uh that the Irish housing market is still fundamentally a supply-constrained housing market. In fact, the number of homes available for say Dubai remains less than half pre-COVID levels, particularly outside Dublin. So it is very, very constrained. Having said that, though, house price inflation looks like it's slowing modestly. It's still growing and it's still high by international standards. And in fact, the CSO said that house prices nationally grew by just less than 7% in February, which is down slightly from previous year and year rates of growth, and the month-to-month rates of growth have declined quite sharply. And in fact, last month it went into negative territory. So it does look like house prices themselves are starting to level off to some extent. Don't think we'll see an outright fall, but I don't think we're going to see outsized increases going forward. House price inflation remains much uh stronger outside of Dublin than in the Dublin market, and apartment prices are outperforming house prices in general as well. Um, in terms of new home completions, they disappointed somewhat in 2024 with only 30,000 units built. That was down to the fact that there were very few apartments built in that year. But last year in 2025, we saw a reasonably strong pickup in house supply at over 36,000 units, driven largely by a big pickup in apartment supply. Apartment supply increased by 60% in 2026. But having said that though, even though 36,000 is uh is a good number, the housing market needs somewhere in the region of 50 to 60,000 units. And probably one of the more disappointing statistics about the Irish housing market is that in 2022, 36% of young adults aged between 20 and 34 live at home. That's up from 27% in 2011. So you're still seeing that tight supply, limited availability, increased housing size because um the younger cohort, younger age groups, are finding it difficult to get housing and getting onto the housing market.

SPEAKER_02 12:18

And and you you said there, Pat, the house prices are still increasing at the edge of the day. But it is it has fallen back to increasing by 7%. Where did that peak at the height of it?

SPEAKER_03 12:27

Uh well, it depends why you said it, but there it was pushing towards double digitarity for a period of time. So it has cooled from that level of rate of growth. We're seeing monthly house prices starting to, as I said, we saw an actual fall in house prices. Whether that'll be sustained going forward, it's hard to know. It'll depend probably a lot on the interest rate outlook. Um, if interest rates start to tighten, they start to go up, that would take that momentum out of house price, and you could see house prices uh slow down further in that scenario. But because of that lack of supply and still very strong fundamental demand, I don't think we're gonna see house prices falling. At best, they may have flatline over the course of this year and next year if interest rates were to go up materially from current levels. But even that aside, we're still going to see house price inflation this year, but just not at that kind of double digit levels we saw at its peak.

SPEAKER_02 13:12

That's the positive side.

SPEAKER_03 13:13

Yeah, a little bit anyway.

SPEAKER_02 13:14

And then the government's recent housing interventions, what are we seeing there? And just explain that a little bit more detail. Yes.

SPEAKER_03 13:22

To really get supply up to the 50, 60,000 units, we need a lot more apartments making up that supply makeup. And the government policy interventions over the last two to three years have been particularly designed to try and encourage that supply. Um, so they did things like postpone uh development levies, they provided um refunds for water connections, they also made big changes to the rental regulations in Ireland. We still have rental regulations in Ireland, but they're not as restrictive as as they once were, which will make it more attractive, more appealing, and make it more viable for first of all developers that build apartments, and then for either owner occupiers or more one of the areas that they're really targeting is to get institutional investors back into the Irish market to fund the purchase of large blocks of apartments that ultimately can be let out to the housing market as well. And they this seem to be having an impact. The area I work in, we work very closely with uh housing developers who build the houses, we've supplied funding for them, and their approach to apartment development has changed. They're a lot more uh positive about it. We're seeing a lot more loan applications then to fund departments. I mean, and that should translate into higher apartment supply, if not this year from 2027 onwards, because it takes about 18 months to two years for development to start to complete. So we mightn't see huge pickup this year, uh, but certainly 26 or 27-28 onwards, we think we'll see a lot more apartment supply coming onto the market, which is very important into the overall mix.

SPEAKER_02 14:44

Yeah, I think you've actually read my mind in terms of wondering when we would actually see this happen or manifest as such in the market. So you're talking maybe not necessarily this year next year, but certainly into 2027. Yeah, there is a lag.

SPEAKER_03 14:53

I mean, because there was while we are seeing a lot more funding for apartments this year, yeah. We saw very few applications for funding over the last 12-18 months. Yeah. So you you have that lag that that'll that'll have an impact. But there's momentum there. Momentum is starting to encourage, and I think it's driven largely by the policy changes that the government has brought in over the last 12 months.

SPEAKER_02 15:12

And talking of the National Development Plan, then what impact is that having on the infrastructure?

SPEAKER_03 15:17

It should have a material impact. The National Development Plan commits about 275 billion between now and 2035, so it's quite a sizable amount of investment that the government is targeting into the overall development infrastructure for the Irish market. Of that, 40 billion is allocated to housing and enabling infrastructure for housing. So we're talking about roads, water, electricity, to make it easier to get houses once they're built, connected to the system, and they can be actually used. Like the blockage of infrastructure, whether it's water connection or ESP connection, has been a big problem in the Irish housing market over the last number of years. And this part of the National Development Plan is very much targeted to address those issues, to make it easier for um uh housing to be built and supplied and make that process quicker and more certain for developers. So that that that should have a material impact. But again, it's not going to be overnight, it takes time, these are long-term investments, and but certainly within three to five years, we should see material differences and hopefully see housing supply getting up towards those um demand targets that I've mentioned.

SPEAKER_02 16:18

Those connectivity issues have certainly featured in some of the headlines over the last couple of years, so that is also obviously positive news in that regard. Uh, and talking of headlines, something else then, Pat, that is never far from it is the challenges that face the first-time buyers and the first-time buyers market. What kind of supports are out there now for that cohort?

SPEAKER_03 16:37

There's actually quite a number of supports for the first-time buyer market. Um, you've the long-standing help to buy scheme, which uh helps uh home buyers uh get a deposit. Uh, a more recent scheme that's been in place now, probably for the best part of the three to five years, is the first home scheme. That's a support for first-time buyers where uh it's it's a shared equity scheme that helps first-time buyers primarily to bridge the gap between mortgages deposit and the price of a new home. Um, so as of quarter one of this year, over 10,000 buyers have been approved into the scheme, of which 5,300 homes have already been purchased with the help of the first home scheme. The average house price supported is about€270,000, and the equity support that's given through the scheme is approximately 66,000 or 17% the price of a new home. So that's kind of a shared ownership scheme between the homeowner and the first home scheme. The first home scheme is funded by the government and uh three main retail banks, ourselves Bank of Ireland and Parameters B. The first home scheme is used a lot in conjunction with the help to buy scheme. Uh makes that affordability the first step to get on the housing ladder a lot more achievable, particularly for the key worker cohort in the economy. You're talking about the nurses, guards, teachers, and they actually figure quite predominantly in the uses of these schemes as well. So it's it's actually it's working and it's targeting the right part of the market that we want to see help get on the housing market and need to pay back that equity over time. Um, but the the the structure of it is reasonably easy to understand and user-friendly for first-time buyers.

SPEAKER_02 18:05

It's a robust plan that you've talked about, Pat there, in terms of what is out there in the market. It's a very positive compared to previous years, I would say. Uh, when we've done this, I can't tell you the amount of numbers we're after landing on me that uh we'll not be able to remember. Now, I don't think we've had them in a podcast before, but um positive numbers, which is good to hear. Pat, you did mention it um earlier in the podcast, but again, just to summarise uh for our customers, then what does all of this mean for supply expectations over the medium term?

SPEAKER_03 18:33

Yeah. Well, this year we expect supply to get up to about 39,000 units, growing to 41,000 in 27 and up towards 45,000 plus from 2028 onwards. So if all these schemes land or all the policies they take effect, if we don't see too much change in terms of monetary policy mortgage rates, I think those uh supply numbers are very achievable because the government have made a huge effort to try and make it more viable, make planning more certain, and make infrastructure more accessible for developers.

SPEAKER_00 19:09

And Pat, that that 27, 28, that's the uplift there. That's your expectation in terms of the apartment side of it.

SPEAKER_03 19:16

It's critical for that departments to flow through. If we don't see apartment coming through, those numbers will be very difficult to achieve.

SPEAKER_02 19:22

Great, thanks, Pat. Then I suppose John and Pat, what impact is the Gulf crisis then coming back to the conflict? What impact is that having on the housing markets?

SPEAKER_03 19:33

Yeah, uh if the conflict is prolonged and we see you know inflation really starting to accelerate, we see higher interest rates, we see commodity prices growing, it's going to make the cost to develop housing a lot more expensive. So what will happen is developers will start to postpone schemes or worst case scenario, start to cancel schemes. So over longer term, if this is to persist, we'll actually see supply numbers start to fall. I don't think it'll happen that we'll see significant house price falls. I think the correction will be on supply numbers. And because you still have that strong level of demand, the demand level might weaken a little bit in tougher economic conditions, but because we have such a fundamental level of demand, I think that'll continue to support house prices. So I think the adjustment will be on the supply side with with sure house price inflation slowing down again. But I don't think we're going to see any material correction in house prices per se. If the crisis can be resolved reasonably quickly, as in the next one to two months, I don't think it'll have too damage an impact or have any material impact on those supply numbers that I mentioned.

SPEAKER_00 20:34

Just in terms of the timeline, it would be next year's supply rather than this year's supply.

SPEAKER_03 20:36

This year, exactly, for sure. Yeah, because sorry, what's being built at the moment will be built out. It's new schemes that may be in planning or land developers are thinking of buying, they would postpone those decisions if this crisis were to be sustained.

SPEAKER_02 20:49

Yeah, similar to what we've seen in the past, just prior to, I suppose, Ukraine and through COVID, that's some things are putting a longer finger. Exactly. Um talking of the conflict, then bringing that back to the financial markets, John. What expectations do you have? Let's start with interest rates first and then we talk FX.

SPEAKER_00 21:04

Yeah, well, it's timely because as we look ahead to next week, we have the three main central banks from our perspective here in terms of the ECB, the Bank of England, and the Fed. So straight up, we don't expect any policy changes uh from any of those three. Uh, I suppose the specific focus from our viewpoint will be on the ECB meeting and what sort of guidance they give as to what to expect over the remainder of the year. Interestingly, President Lagarde has been speaking over the last week or so, uh, and she's been pushing back to some extent against those rate expectations in markets for hikes. If you if you if you look at what's priced in, the markets from an ECB perspective is pricing in uh a rate hike by July, if not by June. It's nearly fully priced in by June. So we look ahead to next week's uh ECB meet to see you know what level of guidance, if any, is forthcoming uh from the ECB on that side. From our house view perspective, we take the view that we think that the conflict will be resolved uh sooner rather than later. So we think that the ECB may be able to hold off raising rates this year despite what's priced in to the market. I think if there was a more longer-term lasting resolution, we could see some of those rate hikes been priced out fairly quickly, as quickly as they were priced in. So our view is that at the moment we think that the ECB may be able to keep rates at 2% through the year. But the risk is as the longer the conflict goes on, then it may force them into having to hike interest rates to manage uh their price stability mandate.

SPEAKER_02 22:28

And then the Bank of England are pricing, the market is pricing uh 50 basis consequence. Where are you on that?

SPEAKER_00 22:34

So what our view is, and if you think uh Governor Bailey uh was out immediately after the last Bank of England meeting and also in the last uh week explicitly pushing back against market expectations, saying that the market had had gone too far. So, you know, from that perspective, you listen to who's driving the bus, uh, and and there's no willingness there at the moment to sound uh hawkish or to have an upward bias uh on rates. So so our view is that we think the Bank of England just keeps on hold. But given that the UK economy is still fairly subdued, and and prior to this crisis or to this conflict, the Bank of England was in a rate cutting cycle. We think towards the end of the year, the last quarter, if the war is resolved, then the Bank of England may turn back and switch back towards uh cutting rates on hold for the near term, but we would highlight the potential for a rate cut from the Bank of England before the end of the year.

SPEAKER_02 23:22

And stateside?

SPEAKER_00 23:24

Well, it's a bit more complicated stateside because we do have a new Fed share coming in, Kevin Walsh. We don't know exactly when he's going to be voted in. Uh now, obviously, he does have a dovish bias for rates, and if you look at the market's not pricing rate hikes in the US, uh like the its pricing rates have been on hold through this year, whereas previously it was pricing in 50 base points. Uh, we think as we get to the end of the year, the Fed will be able to resume uh rate cuts. So we see rates getting down by at least 25 base points lower than where they are at the moment uh by the end of the year under the chairmanship of Kevin Morse.

SPEAKER_02 23:57

Well, I think that's kind of aligned with their dot plot, is it a 25 base point cut as well?

SPEAKER_00 24:01

So their latest dots were in March. They're still at one cut uh for this year and next year. Uh we think that probably over the next two years, rates will go lower than where they're currently guiding at the moment. We think at least 50, if not 75, potentially from the Fed. So rates getting down towards at least 3% uh over the next 12 months.

SPEAKER_02 24:19

So we've harmony on the side of the US in terms of our outlook for uh Yeah, we're closer to market pricing in terms of that there.

SPEAKER_00 24:26

Even though if you look at market pricing, the market's not fully priced in a rate cut in the US till the second half of next year. We still think that could happen before the end of this year.

SPEAKER_02 24:35

Okay.

SPEAKER_00 24:36

So the direction of travel is the same, but the timing's different.

SPEAKER_02 24:39

Um from our customers' point of view, I need to talk quickly about currencies uh before we wrap this up. We talked earlier about 118 being the handle. It's funny, back at the beginning of the year we're talking about the 120 handle, and if a break above that could be sustained, are we pulling that back down to 118 now? Is 118 just the focal point?

SPEAKER_00 24:55

118 is the is is the focal point at the moment because it's it's been noteworthy that when things have been positive, the news flow and developments with the war in the Middle East, Euro dollars tested back above 118. Why is that? Because that's where it was before the war started, it was in around 118. As I said, we got to a low 114 in the early days of the conflict. Since then, we've been more broadly in a 116 to 118 trading range. Uh so to get back to 118 and hold around there means that the news has to turn and development's more positive on that. We still hold to the view that by the end of the year we can test back up towards 120. Uh, the reason for that is that uh, first of all, it's based on the scenario where there is a near term rather than a longer term resolution, so things get resolved quicker uh rather than later, but also the fact that the Fed uh under a new Fed share uh will have an easing bias, uh, so that could weigh somewhat uh on the dollar, which is why we see it testing back up towards 120. But the first thing is to sustain and hold above 118, and in the near term, you're dealing with a war situation, uh, so that's dependent on that getting resolved, and then we can push back up towards 119, 120 by the end of the year, and then very briefly, euro sterling, it's been fairly dull uh in terms of the ranges there. If you look at since the start of the year, it's been broadly in an 86 to 88p trading range. Now we do have a slight bias for most of it. We've been in around 87p for much of the last couple of weeks. We would highlight the upcoming local elections in the UK given the political pressure that's on Prime Minister Starmer at the moment. We think there is a little bit of political risk for Sterling and some potential weakness there because if there was to be a change of leader in the UK, the market may get worried uh that a new Prime Minister, a new Labour head, would have a more fiscal expansionary stance. And given the still precarious fiscal situation in the UK, that could be a negative for Sterling. Uh so net net we would have a slight bias for a euro to trade slightly higher against Sterling between now and year end in level terms. That means rather than being closer to 87p, we get closer to the 88p.

SPEAKER_02 26:52

John, just on that now, before we finish off, are you talking about a weaker sterling and a weaker dollar versus stronger? I mean, the PMI is out of the Eurozone earlier, we're back in contraction space, weren't they?

SPEAKER_00 27:02

Yeah, so it turns survey data is fairly weak. So there's not a lot to differentiate. The US economy is still will grow stronger than both the Eurozone or the UK this year, but US interest rate policy in terms of interest rate differentials uh will be negative for the dollar. Also, if we're in a more settled geopolitical situation, then risk haven, safe haven support for the dollar would be lessened. So that also lends you towards weakness uh for the dollar from that perspective. Uh and the really only thing to differentiate at the moment, euro versus sterling, is potentially some political risk in the UK and political uncertainty there, which is why now moving from 87 to 88p is is not a huge percentage move uh in in terms of levels there, but we still would have a slight upper bias for euro against sterling, despite the fairly weak outlook uh for the eurozone, because eurozone and UK outlooks are fairly subdued. So one thing that could differentiate it. And also the other key thing is if the Bank of England start to resume rate cuts, whereas the ECB remains uh on hold, would push us towards Euro dollar being higher now at the end of the year compared to current levels.

SPEAKER_02 28:04

Yeah, just to looking at the ranges before I finish it out then. So for Euro Sterling year to date, it's been I think 87.89 was the high to a low of 86.12, uh, mid-March there, and your Euro dollar looks like it was 120.78 in January was the high and 114.12. So for any muted ranges given the external conflict that is going on out there at the minute and the potential for volatility. I think we might wrap it up there, gents. Uh, John and Pat, thank you both for your insights today, both on the markets and of course the housing, real estate and construction industry. It has been really informative and I hope it's useful for our listeners alike. It goes without saying if you have any questions on any of the content today, just drop us a line. The details will be in the notes below. You can also find all our economic analysis on our website, fxcentre.com. Thanks also to SJ and Rachel for editing and producing the podcast, and thanks also to all our listeners, of course, to stay up to date with the latest market developments. Simply subscribe to AIB's Market Talk wherever you get your podcasts.

SPEAKER_01 28:59

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