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Lending in the UK is not going to improve, but technicals suggest some upside for GBP

The quarterly BoE report on lending conditions based on surveys showed a marked deterioration in the expected availability to households of unsecured loans. Bear in mind that the main macroeconomic story now from the rate path point of view is whether there will be enough demand in the economy to offset the declining private consumption. The lending survey suggests households will be less able to upgrade their spending power with loans and the last data on wages suggests that the acceleration was too slow to cope with the pace of consumer inflation.

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The results of BoE credit survey look the worst since the global financial crisis when one looks at combined indicators of recorded past quarter (blue bars) and expectations for the next quarter (red dotted line); source: BoE

The prospects of investment prospects are also not looking good as the BoE publication still reports no improvement in corporate demand for credit since the Brexit referendum. Notice the lack of a solid positive blue bar on the chart below showing there’s no offset to the large negative changes of demand in 2016, no matter which class of enterprises we analyze.

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There was no window of rebound of corporate credit demand post the referendum, and the uncertainty caused by UK-EU negotiations may prevent any openness to invest in the following quarters; source: BoE

This report should be seen as GBP-negative, but from a technical perspective the pound is not at a disadvantage.

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GBPUSD is trending higher and the correction today has not taken it far enough from the upward trendline to suggest that this positive move is over;  source: xStation5

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EURGBP still has some downside momentum and some room before it enters a strong supply zone that is keeping the pair in check this year; source: xStation5



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