The latest currency forecasts out of RBS are, as expected, bearish on the British Pound Sterling, GBP. A slew of PMIs this week unlikely to change underlying sentiment. Support from safe haven flows continuing to ease. The traditional driver of interest rate support is unlikely will not provide much support until 2012. The euro exchange rate, EUR, is interesting in that the determinants of euro value appear to be shifting. "Uncertainty over future EFSF funding not having a major negative impact on the EUR, as sovereign debt concerns appear to be losing their EUR negative impact. Potential shift in ECB inflation outlook appears a bigger risk," say RBS. The US Dollar, USD, is forecasted to experience a modest boost. The Jackson Hole conference provided little new information to move the USD. "August economic reports likely to be weak and, paradoxically, could boost the USD modestly if rate expectations fall in the rest of the G10 world," say RBS. Analysts at RBS are maintain a cautiously optimistic view on the Australian dollar, AUD. Currency analysts say that they expect AUD/USD to revisit the highs around 1.10 over the next 6 months. In contrast to interbank futures, RBS Economics do not expect RBA to retract from rate increases. The Canadian Dollar, CAD, on the other hand could face some downside risks. Some risk of a downside surprise in Wednesday’s Q2 GDP, which could deteriorate BoC rate expectations further, increasing potential for CAD downside. Otherwise broader risk backdrop will remain key driver of CAD.

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