Daily Market Report 13/09/16

GBP

The Bank of England has revealed the details of its £10bn money-printing programme, in which it will buy high-quality company bonds. In order to be eligible to have their bonds bought by the BoE, companies need to make a significant contribution to the British economy, and not be part of the financial services sector. The central bank said it aimed to buy bonds so that its holdings were representative of the British corporate bond market as a whole. Based on debt currently in issue, this would mean 25% of bonds would be from electricity companies, 15 % from non-cyclical consumer companies, 14 % from the industrial and transport sector, and 13%  from communications firms. Smaller percentages would be bought from cyclical consumer companies, utilities and property businesses. The Bank will purchase bonds on the 27th of September for an initial period of 18 months.

Further signs of how the UK economy is performing since the Referendum will be seen today, with UK inflation data for August due to be released. UK inflation hit a 20-month high in July with CPI rising to 0.6 per cent year-on-year. Base effects from higher fuel prices were one reason for the rise in the year-on-year rate, and sterling weakness could also have been a factor. The trend is expected to continue into August, with CPI moving to 0.7 per cent year-on-year.

With a busy week ahead, Wednesday sees the release of the UK unemployment figures and Thursday is the Bank of England’s rate setting meeting.

Key Announcements

09:30 - GBP - CPI year on year, expected to increase to 0.7%

10:00 - EUR - Draghi speaks

10:00 - EUR - German ZEW economic sentiment is forecast to increase to 2.8