The market has fought off geopolitical concerns with the brent crude oil price falling to the lowest level this year. The risk that new sanctions on Russia will constrain the country's exports of energy, metals and grains is likely to be a latent concern in commodity markets for as long as the conflict goes on.
The global economic recovery is gaining traction. Growth in the Chinese economy has accelerated recently and the US recovery is strengthening. We are therefore optimistic on behalf of the global economy and expect growth above 4% next year.
The EUR/USD is slowly grinding lower triggered by the easing measures introduced by the European Central Bank in June and rising growth in the US economy. We expect EUR/USD to head an additional 5-6% lower over the coming year.
The Oil market remains well supplied, which keeps the market balanced amid rising demand. The risk of supply disruptions on the back of geopolitical conflicts is limited. We maintain our forecast for Brent of an average price of USD99/bbl, which is below forwards. We therefore recommend clients on the consumer side to leave some exposure open to benefit from the price decline.
Accelerating demand in China and supply tightening on the back of the Indonesian export ban are supporting prices. We have revised up our 2015 forecasts for aluminium, Copper and Zinc. Our forecasts are above forwards and we therefore recommend clients on the consumer side to lock in exposure at current low levels.
Mounting supplies are currently weighing heavily on grain prices. We have revised down our forecasts reflecting the benign outlook for supply and the lower risk of a disruptive El Niño this year. Overall, our forecasts are close to forwards.
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