GBP flows: GBP slips on weaker GDP
GBP lower as January GDP falls 0.1%
EUR/GBP has gained 10 pips in early trade after weaker than expected January UK GDP data. This fell 0.1% m/m against a market consensus of a 0.1% gain, due mainly to a 0.9% decline in production. Services rose 0.1% and construction fell 0.2%. The picture is still not clearly weak, as the December gain of 0.4% means that Q1 is still likely to be positive, and on a 3m/3m basis GDP is still up 0.2% in January. Nevertheless, the data is on the soft side and with yield spreads already suggesting upside scope for EUR/GBP, a break back above 0.84 looks possible.
Overnight we saw some mild JPY weakness, helped by some strength in Chinese equities – the Shanghai composite reached a new high for the year – and some indications of dialogue between the US and Canada. But with yield spreads still pointing lower for USD/JPY we wouldn’t see any real prospect of a break above 150.
