GBP monthly currency outlook (6-12 Month)

Longer-term, there are two key risks for GBP - the UK's unsustainable current account deficit and the EU referendum, promised for end-2017 at the latest. 

"We think both are manageable, however, and the current account may actually strengthen the case for GBP outperformance. The U.K.'s external deficit is largely a public sector phenomenon and this is still true, but is becoming less so as the household sector slips into deficit", states RBC Capital Markets. 

As this happens, the policy prescription is slowly shifting to tighter monetary and fiscal policy rather than fiscal policy alone. 

As to the rising risk of U.K. EU exit, on the face of it, there are reasons to think GBP should carry a rising risk premium. This month's YouGov poll showed a small (2pt) balance in favour of voting yes to leaving the EU. In the longer term, the balance of opinion has almost always been in favour of staying in and it still is when pollsters add a qualification that the government recommends voting to stay. 

"We maintain a moderately constructive long-term view on GBP", says RBC Capital Markets.