Short GBP on political risks: RBC Capital Markets

Having been caught in the crossfire of EUR and USD for most of 2015, GBP is finally weakening independently.

The disappointing economic data also reflects a rising political risk premium as the outcome ofthe election - now just six weeks away - gets no clearer.

"With this premium likely to grow further, we suggest shorting GBP against an equally weighted basket of USD and EUR", says RBC Capital Markets.

Despite GBP's 500pt fall against USD in 2015, it is only in very recent weeks that this has reflected independent GBP weakness rather than broad USD strength. 

As the simple diffusion index shows, for most of 2015, GBP has been rising against more G10 currencies than it has been falling. 

Tentatively, that appears to be changing with the balance shifting in favour of independent GBP weakness in the last three weeks and GBP falling against all other G10 currencies so far this week.