Barclays Forecast US Dollar Resurgence By Q3 Of 2015

18/05/15 -- Current pound strength against the US dollar isn't expected to last long, according to Barclays. Last week's push to a 6-month high of over 1.58, following the surprise Conservative majority in the General Election, will be short-lived and the greenback will soon assert its superiority over both sterling and the euro, they predict.

Despite the pound hitting its highest against the US currency since November last week, they forecast a sharp drop to only 1.39 in the next quarter (down 11% from where we are currently), falling to 1.38 in Q4 and 1.36 in Q1 of 2016.

The euro is likely to perform even worse. Barclays say "we believe that the EUR has much further to go in its trend depreciation, albeit at a slower pace and with higher two-way risks attached. Moreover, we still think the EUR faces risks from a prolonged period of Greek political uncertainty."

The euro has recently risen close to 1.15 against the dollar - it's best level since early February - but that won't last long, with a fall to parity on the cards in Q3 of 2015 (a 13% decline), and the single currency seen dipping below that level in Q4 (0.98) and again in Q1 of next year (0.95).

The pound will still continue its trend of modest appreciation versus the euro, rising above the 1.40 level that has proven to be a difficult nut to crack, in Q4 and hitting 1.43 in Q1 of 2016 for a near 4% increase on where we are today, they estimate.

The forecasts given for the pound seem pretty bearish in particular to me, but IF they are proven correct then they could add some support to London wheat.

The outlook for the euro I can buy into more easily, which would certainly continue to boost EU wheat exports in 2015/16, and again help underpin Paris wheat.

All this won't help US wheat exports though, if it comes true, and it could certainly be construed as outright bearish for US corn and soybeans given current planting progress figures and the forecast for a non-threatening El Nino-linked summer.