The pound rose to hit a new 16 month high against the euro yesterday after the Office for National Statistics (ONS) reported that the UK CPI increased by 0.2% in April to 1.8%, up from a reading of 1.6% in March.
This will inevitably lead to an increase in speculation as to whether the Bank of England will raise UK interest rates as early as this year instead of next in order to dampen down any inflationary pressures in the economy.
By the retail price index (RPI) measurement of inflation, this now stands at 2.5% year-on-year, in line with the previous month’s figure.
Ahead of Thursday’s European elections, two surveys found that a British exit from the European Union (EU) would hit British companies' trade and export prospects.
Almost half, or 49.5%, of 2,850 companies see Britain staying in the EU as critical to their business, up from 45% last year, according to the International Trade Survey 2014 compiled by AIG, Trade & Export Finance and The Institute of Export (IOE).
A separate survey from the British Chambers of Commerce (BCC) showed that 61% of firms believed a British withdrawal from the EU would hit their business prospects, with only 12% viewing it as positive.
The IOE's Director-General Lesley Bachelor said a UK departure from the EU would further hinder companies already struggling to hit a government target of £1 trillion of exports by 2020.
Bachelor said "There is a real concern that UK exports are not rising fast enough to meet the government's target. UK exports reached £304 billion last year, up from £300 billion in 2012 and as the economic recovery takes hold, export levels should accelerate. However, the EU remains the UK's largest overseas market, accounting for around 60% of national exports. The negative impact of the UK leaving the EU would be significant on UK companies and the balance of trade."
The BCC also said that UK companies' support for Prime Minister David Cameron's strategy of renegotiating the UK's links with the EU before holding a so-called "in-out" referendum has also declined significantly.
BCC Director-General John Longworth called for a debate on Europe based on pragmatism, hard evidence and good information rather than ideology.
Longworth said "In the space of a year, business opinion on a renegotiated relationship with Europe has started to cool. Although we can't be certain, there are a number of possible explanations. The on-going recovery, coupled with less frantic media headlines around the state of the euro-zone in the last 12 months, could mean businesses are less concerned about the UK's relationship with the EU compared with a year ago. Our findings suggest the PM may soon need to shore up flagging business support for his 'renegotiation and referendum' strategy."
The Thai baht fell sharply yesterday after the armed forces took control of the streets of Bangkok and television stations after declaring a nationwide martial law.
Army chief General Prayuth Chan-ocha assured that the action taken was 'not a coup' and therefore does not signal an immediate overturn of the interim government. The martial law gives the army civil authority to guarantee order, censor the media and prohibit meetings. According to Chan-ocha, this action was needed after six months of institutional paralysis and protests. Some radio and television stations stopped broadcasting while others have received an explicit order not to report in the detriment of national security.
Credit ratings agency Fitch Ratings said it is keeping the situation under close review but that the imposition of martial law is "not, in itself, negative for Thailand's ratings."
Finally, the Australian dollar took a hit after the latest policy minutes from the last Reserve Bank of Australia meeting showed that policymakers believe that the current stance on accommodative policy will be appropriate for some time. Interest rates have now been kept at their current record low rate of 2.5% for nine straight months.
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