EUR, GBP flows: GBP weaker on PMIs

Eurozone PMI came in marginally above consensus, while UK composite PMI is weaker than expected, although still above Eurozone levels. In reality, UK PMIs are a much less reliable contemporaneous indicator for GDP, so we would ascribe very limited significance to the UK data. Even so, it has been enough to push EUR/GBP a little higher, reversing most of yesterday’s losses. We still see upside risks for EUR/GBP as real yields slowly converge with the Eurozone (at the short end). This will still likely take some time, but tighter UK fiscal policy and easier monetary policy than currently priced in suggests a steady uptrend towards 0.90.