The pound to US dollar exchange rate is currently at 1.556. The latest exchange rate forecasts to come out of RBS show that the British Pound is expected to weaken further against the US dollar over a 6 month time frame. In 6 months the pound dollar exchange rate is forecasted to be at 1.541. However, in 12 months the rate is forecasted at 1.653. The pound euro exchange rate is forecasted at 1.176 in 6 months and 1.198 in 12 months. The pound euro exchange rate is currently at 1.165. The pound Australian dollar exchange rate is expected to strengthen in the next 6 months from 1.613 to 1.622. However in one years time the GBP AUD is called at 1.503. A key driver behind the British pound will of course be decisions made on Monetary Policy at the Bank of England. The BoE also meet on Thursday although no change in policy is expected. RBS Economics are placing roughly a 20% probability on further asset purchases being announced this week, rising to 40% by November, and 80% by February 2012. There are three main reasons they see for the delay. Firstly, market expectations of QE2 have already driven yields lower. Secondly, some MPC members remain concerned about how quickly inflation will fall back to target and, finally, there may be a desire to wait and see if Euro-area leaders can first implement the necessary actions to increase the flexibility of the EFSF and maximise its impact in order to address contagion to tackle the Euro-zone crisis. PMI surveys this week will be watched closely, although with the manufacturing PMI already having come in better than expected; these appear unlikely to force the BoE Committee into action in October.

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