GBP flows: GBP firmer after strong PMI

More strong UK PMI numbers in August. The UK data has consistently surprised on the upside this year, notably manufacturing. The rationale for that remains somewhat elusive, given the weakness of the manufacturing index in the Eurozone, and at this stage there is very little correlation between UK manufacturing output data and the manufacturing PMI. Nevertheless, with the UK services index also solid, and GDP growth strong in H1, this is all supportive of GBP strength. We have seen a dip sub-0.85 in EUR/GBP, but further GBP gains are likely to be more difficult as these are already quite extended valuation levels for GBP.