GBP flows: GBP little changed after as expected GDP data

UK April GDP came in in line with expectations at flat on the month, with a 0.2% rise in services and strength in utilities and mining offsetting weakness in manufacturing (-1.4% m/m) and construction (also -1.4% m/m). On a 3m/3m basis growth still looks quite healthy at 0.7%, and the flat month after a 0.4% rise in March will not be a real concern, although the weakness in manufacturing and construction might be an issue if it were to be repeated in coming months.

GBP is little changed after the data, with EUR/GBP still pressing recent lows on the back of general EUR weakness that has followed the announcement of the French election. We still doubt that this pressure will be sustained unless there is evidence of weakness in the Eurozone economy, but it might require weaker UK CPI data next week if EUR/GBP is to return towards 0.85.