Daily Market Report - 17/02/2016
Inflation edged up to its highest rate for a year last month as rises in the price of alcohol and clothing pushed up the cost of living. The consumer prices index rose to 0.3% in January from 0.2% in December. Alcohol and tobacco rose by 1.3% compared with January 2015, when there were heavy discounts on beer. The ONS said inflation also rose as fuel and food prices dropped less than they did a year ago. But despite the rise in CPI, the Bank of England predicts inflation will remain far below the government’s 2% target for some time yet.
Sharply lower oil prices are set to keep a lid on inflation, leaving the UK central bank in no hurry to raise rates above 0.5%, where they have remained for nearly seven years.
Later in the day Prime Minister David Cameron presented his case for an overhaul of the terms of Britain’s EU membership to Brussels. This two day summit will be a crucial step to determine if an EU referendum will be held on Friday as hoped. Martin Schulz, president for the European Parliament, told him that the deal could not be legally binding before the EU referendum and may even be amended, contradicting downing street statements. Ahead of talks with David Cameron on Britain's membership, Mr Juncker the European Commission, said: "If I would say now that we have a plan B, this would indicate a kind of willingness of the commission to envisage seriously that Britain could leave the European Union. So I am not entering into the details of a plan B, because we don't have a plan B, we have a plan A."
Qatar, Saudi Arabia, Russia and Venezuela agreed yesterday to freeze oil output levels to tackle the supply glut leading to 13 year price lows. The deal would however is reliant on other producers joining in, mainly on Iran, absent from the talks and determined to raise production. However some analysts feel this is meaningless due to concerns on participant’s commitment to the deal.
09:30 – GBP: UK ILO unemployment rate (Dec) expected to fall from 5.1 to 5%
19:00 – GBP: US Federal reserve FOMC meeting minutes