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The FTSE-100 index in London hits a 13 year high

Published: 21 May at 11 AM Tags: Euro Exchange Rate, Dollar Exchange Rate, Euro Crisis, UK, Economy, Inflation,

A quiet start to the week saw the US dollar retreat as the ‘risk-on’ rally in world stock markets continues unabated. Yesterday, the Footsie in London hit a 13 year high.

Today sees the publication of UK inflation data but tomorrow, with the publication of the minutes of the last Bank of England and Federal Reserve meetings is likely to prove to be the highlight of the week data wise.

Fed Chairman Ben Bernanke will also testify tomorrow to the US Senate with his latest assessment of the world’s largest economy.

In the euro zone, it looks like Germany is working on minor changes to current European Union (EU) treaties in the hopes of speeding up the decision-making process and thus avoid an overhaul that might result in the repatriation of powers from Brussels to the UK.

Berlin hopes to follow a minor treaty framework that was used to create the euro zone rescue fund and the agreement on budgets in order to avoid a full-out treaty change as envisaged by UK Prime Minister David Cameron who has promised the British people a full referendum by 2017 on Britain's relationship with the EU.

German Chancellor Angela Merkel seems frustrated by the slow pace of economic decision-making and feels that the current euro zone governance structure is unfit for the pace of globalization where competing economic blocs are able to move faster in response to economy.

In the UK, leading forecaster the Ernst & Young Item Club reported yesterday that high inflation in the UK has cost the UK economy £10 billion over the past three years.

The rate of inflation in the UK has averaged 3.5% instead of the government’s target of 2.0%. In its opinion, it is unlikely that the rate of UK inflation would fall lower than 2.5% over the next four years with inflationary pressures expected to peak this summer.

Last week in its latest quarterly inflation report, the Bank of England said inflation was not expected to dip below its target until late 2015.

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