Bank lending falls

The number of people taking out loans with UK banks has dropped marginally, according to the British Bankers Association (BBA). A total of 42,808 loans were permitted in October, a dip of 375 on the figures of last September. The statistics also revealed that the number of loans to businesses has deteriorated once again; with analysts expressing their disappointment after a large rise on business lending in September. The BBA figures for mortgage lending still show a large increase of 33% over the last 12 months. Nevertheless, the small monthly decline may be the result of some lenders becoming more vigilant – in particular, over concerns the state of personal finances and property seeming over-valued. It may also be that some homebuyers were put off taking out a mortgage last month.

In addition to the domestic lending, business offering fell back by £940 million in October, following a rise of £2.5 billion in September. This now raises the question whether October's figures were just a correction to the jump in September or a bigger issue (that banks are not prepared to lend to businesses despite the improved economic situation). Sterling has remained buoyant against the Greenback and euro currently trading at 1.6187 and 1.1935.

The dollar rallied against most of the majors overnight as speculation surrounding this week's economic news flow and its implications for Fed QE taper bets. On balance, US economic data has outstripped relative to expectations since the beginning of the month, however disappointing data yesterday bucked this trend. US pending home sales declined for the fifth consecutive month in October, sending the US dollar temporarily lower against the Japanese yen.

The number of contracts signed for the purchase of single family homes fell 0.6% from the previous month, disappointing expectations for a 1% rise in pending home sales, but better than the revised 4.6% decline in pending home sales in September. Pending home sales declined 2.2% from October 2012, according to the National Association of Realtors.

The US dollar continues to trade around speculation of when the Fed will begin to taper its monthly asset purchases. In the minutes from the October FOMC meeting, the Fed said that it is likely to taper QE in the coming months on better data. Therefore, worse than expected data, like a decline in pending home sales, may add to expectations for the Fed to not taper in December.

Finally, European headline data is quiet until the middle of the week. Then, we have German consumer confidence data tomorrow and the unemployment and inflation data on Thursday.