Recently, the European Central Bank (ECB) has released its quarterly survey of 158 big banks which highlighted that “firms’ demand for credit dropped to lowest since the survey started in 2003”. The survey revealed other important takeaways such as a net 14 percent of Eurozone banks tightening credit standards in the second quarter of 2Q23 in comparison to the 27 percent in the first quarter of 2Q23. Banks are predicting a more moderate net tightening on loans to firms in 3Q23, yet home loans will remain unchanged. Additionally, it is to be noted that the cumulated net tightening since the beginning of 2022 has been substantial.
Furthermore, the Eurozone banks have reportedly tightened terms and conditions further in 2Q23, attributing to firms’ decline in credit demand. In the third quarter, banks also forecast a much smaller decrease in credit demand from firms. As for banks’ access to funding, specifically retail, the survey revealed a deterioration in 2Q.
In light of this news, EUR/USD is currently trading flat on the day at 1.1062.
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