Bank of Ireland's Economic Research Unit will re-launch our Morning Commentary on Wednesday 7th May.
Having strengthened to almost 1.5350 against the euro on Friday immediately after better than expected US jobs data, the dollar sold off again subsequently and lost further ground yesterday - hitting a low of 1.5535 at one point - notwithstanding further stronger than forecast data in the States, this time in the form of the latest ISM survey of the non-manufacturing (mainly services) economy. It is worth noting, of course, that the dollar had come quite a long way in quite a short period of time - it is only a fortnight ago that it reached its all-time low against the single currency of over 1.60 - so it is perhaps not too surprising that it should give up some ground now. The dollar has benefited from a significant reappraisal of the outlook for US interest rates, but it is doubtful if it can derive too much more support from this source in the short-term. The market expects the Fed to keep rates unchanged for most of the remainder of this year, which is reasonable enough, but expects it to embark on a tightening cycle (i.e. start raising rates) early next year, which we think is unlikely as economic growth in the US is set to remain sluggish for a protracted period. Any further significant move higher in the dollar may require the prospect of lower euro area interest rates to come back on the agenda. The market expects no change in interest rates at all in 2008, though with growth slowing and inflation topping out we think the ECB will have room to lower interest rates later this year. We don't expect the ECB to provide any encouragement in this regard when its meets this Thursday however, with its focus likely to remain on the risks to inflation. The MPC of the Bank of England meets this week as well and it too is likely to keep rates unchanged at 5%. It is only a matter of time, though, before its lowers rates again.
Please contact Michael Crowley + 353 1 6093341 with any queries

Spot & Forward Rates (Mid)					Asset & Commodity Prices
	EUR/GBP	EUR/USD	EUR/SEK	9.3540	ISEQ	6,474.62	+136	10yIRBnd	4.19
Spot	0.7875	1.5488	EUR/NOK	7.8790	FTSE	6,215.50	+128	10yUKBnd	4.50
1M	7	-21	EUR/DKK	7.4628	Dax	7,052.08	+103	10yUSBnd	3.30
3M	18	-69	EUR/PLN	3.4402	Dow	12,969.54	-89	CRB	413.86
6M	34	-140	EUR/ZAR	11.6302	Nikkei	14,049	+282	Oil	115.13
12M	58	-246	EUR/CZK	25.1660	Nasdaq	2,368.48	+5	Gold	877.70

World Rates (Mid)						Chart Points
	CAD	AUD	NZD	CHF	JPY	EUR/USD	EUR/GBP	EUR/JPY	GBP/USD
EUR	1.5631	1.6355	1.9704	1.6304	162.309	1.5600 S	0.7900 S	163.90 S	1.9850 S
USD	1.0107	0.9460	0.7864	1.0512	104.800	1.5555 S	0.7950 S	163.30 S	1.9750 S
GBP/JPY	GBP/CHF	USD/GBP	USD/HKD	USD/SGD	USD/THB	1.5480 S	0.7815 S	162.10 S	1.9625 S
206.8450	2.0777	1.9673	7.7953	1.359	31.7300	1.5430 S	0.7765 S	161.60 S	1.9600 S

Prime	4.950	Money Market Rates				Long Term Fixed Rates
	Base Rates	1M	3M	6M	12M	2Yr	5Yr	7Yr	10Yr
EUR	4.00	4.38	4.85	4.88	4.94	4.65	4.50	4.55	4.69
GBP	5.00	5.56	5.86	5.86	5.84	5.40	5.33	5.28	5.22
USD	2.00	2.80	2.85	3.00	3.31	3.22	3.94	4.23	4.49

Dollar gives up some ground after recent good run	06-May-2008 10:43:07 GMT
Bank of Ireland's Economic Research Unit will re-launch our Morning Commentary on Wednesday 7th May. Having strengthened to almost 1.5350 against the euro on Friday immediately after better than expected US jobs data, the dollar sold off again subsequently and lost further ground yesterday - hitting a low of 1.5535 at one point - notwithstanding further stronger than forecast data in the States, this time in the form of the latest ISM survey of the non-manufacturing (mainly services) economy. It is worth noting, of course, that the dollar had come quite a long way in quite a short period of time - it is only a fortnight ago that it reached its all-time low against the single currency of over 1.60 - so it is perhaps not too surprising that it should give up some ground now. The dollar has benefited from a significant reappraisal of the outlook for US interest rates, but it is doubtful if it can derive too much more support from this source in the short-term. The market expects the Fed to keep rates unchanged for most of the remainder of this year, which is reasonable enough, but expects it to embark on a tightening cycle (i.e. start raising rates) early next year, which we think is unlikely as economic growth in the US is set to remain sluggish for a protracted period. Any further significant move higher in the dollar may require the prospect of lower euro area interest rates to come back on the agenda. The market expects no change in interest rates at all in 2008, though with growth slowing and inflation topping out we think the ECB will have room to lower interest rates later this year. We don't expect the ECB to provide any encouragement in this regard when its meets this Thursday however, with its focus likely to remain on the risks to inflation. The MPC of the Bank of England meets this week as well and it too is likely to keep rates unchanged at 5%. It is only a matter of time, though, before its lowers rates again. Please contact Michael Crowley + 353 1 6093341 with any queries