Barclays sees euro below parity with dollar by Q3 vs Q4 previously

LONDON, March 26 (Reuters) - Barclays (LSE: BARC.L - news) expects the euro to fall below parity with the dollar by the third quarter of this year, instead of the fourth quarter as previously forecast, driven by the divergence in policy between the two regions and in the pace of economic growth.

Marvin Barth, European head of foreign exchange, said he expected the euro to fetch 95 cents to the dollar by the first quarter of next year.

"We look at the main drivers and we see little sign that they are not still in force so as a result we marked down our forecasts," Barth said at a presentation of the bank's global outlook.

"The two main drivers we identified of euro weakness - low economic returns to capital and the ECB commitment to lower rates for longer -- have probably increased a bit more. There's the incredible economic divergence between the two regions."

The euro was last trading at $1.10, having bounced off a 12-year low of $1.0457 set on March 16 after the Federal Reserve signalled a more cautious outlook for U.S. growth. (Reporting by Emelia Sithole-Matarise, editing by Nigel Stephenson)