The Pound remained in a narrow range against the Euro (GBP/EUR) and US Dollar (GBP/USD) in the late morning of Thursday’s European trading as markets digested the Bank of England’s (BoE’s) Credit Conditions and Bank Liabilities Surveys.
UK Lenders Prepare to Tighten Loan Availability
The report revealed that UK lenders are planning the biggest credit curb since 2008 when the Global Financial Crisis (GFC) was in full swing. British banks are going to begin tightening its lending availability in coming months as Britain’s debt levels have reached worrying levels.
The BoE report read:
‘Lenders reported that the availability of unsecured credit to households decreased in Q3 and expected a significant decrease in Q4. Credit scoring criteria for granting both credit card and other unsecured loans were reported to have tightened again in Q3, while the proportion of unsecured credit applications being approved fell significantly.’
Tighter consumer credit conditions is expected to impact spending, and therefore could damage economic growth.
Meanwhile, investors in the US Dollar are awaiting economic data and speeches from US Federal Reserve representatives Lael Brainard and Jerome Powell. In addition, US Initial Jobless Claims data will make its way to the market this afternoon.
In the Eurozone, there’s the potential for some dramatic Euro exchange rate movements this afternoon with European Central Bank (ECB) President Mario Draghi due to make a speech, along with other ECB representatives Peter Praet, Benoit Coeure, and Sabine Lautenschlager. Any discussions on monetary policy and the possibility of the central bank tapering its massive quantitative easing programme could create significant Euro exchange rate fluctuations.
Swedish Krona (SEK) Falls on Diminishing Rate Hike Hopes Following Inflation Report
Meanwhile, the Pound made notable gains against the Swedish Krona (GBP/SEK), rising by around 0.65% after the release of Swedish inflation data. While Swedish consumer prices managed to remain above the central bank’s target for a third consecutive month, the reading came in below expectations. The September figure held steady at 2.3% on the year, despite economists predicting a leap higher to 2.5%. Even some of the most pessimistic economists had expected a slight increase to 2.4%.
Investors sold the Swedish currency as they priced out the possibility of tighter monetary policy from the central bank, Riksbank. Despite inflation residing above the 2.0% target for the majority of the year, it’s thought to be too risky to hike rates until prices have stabilised with an upward momentum. Riksbank has also suggested that inflation may dip below the 2.0% threshold in coming months.
Economist Olle Holgren commented:
‘We have a central bank that is counting tenths of percentage points and this was a tenth lower (than expected), which makes it even less likely that they will do anything in October.’
At the time of writing, the Pound to Euro (GBP/EUR) exchange rate is trending in the interbank region of 1.1162. The Pound to US Dollar (GBP/USD) exchange rate is hovering around 1,3232. The Pound to Swedish Krona (GBP/SEK) exchange rate is residing at levels of 10.7077.