GBP flows: GBP edges up after money data

GBP has moved a little higher after the UK money data, which saw another strong gain in M4 and another above consensus rise in net lending to individuals. Much of this is in consumer credit rather than mortgage lending, and may reflect a need rather than a desire to borrow, so may not be an indication of strength. However, as long as money growth continues to accelerate, the market is likely to see it as a positive for GBP.

EUR/GBP is dipping below 0.87 and may have scope to test the significant support area at 0.8670, but we continue to see scope for the BoE to cut rates more aggressively than the market expects, and for EUR/GBP to consequently edge higher over the medium and long term.