GBP flows: GBP up on stronger than expected GDP

GBP has moved slightly higher following stronger than expected November GDP data, which rose 0.3% m/m against a market consensus of 0.1%. The rise was due to a 0.3% gain in services and a 1.1% gain in industrial output, driven by a 25% increase in car production as JLR plants reopened after a cyberattack. Construction output fell 1.3%, moderating the increase, but the numbers, particularly the services data, suggest the economy is moving along broadly as expected, and will likely douse expectations of any BoE rate cut in the near future. The first cut is currently priced for April (with an 85% probability) and this data will probably not change that significantly. GBP is already somewhat higher than might be expected given current real yield spreads, so the scope for further gains looks quite limited, and we would not expect much progress below 0.8650 in EUR/GBP, but the pound should retain a firm tone through the day.