'Ukraine is puzzling for markets because it is beyond economics' - Przemysław Kwiecień, XTB Poland

 PrzemysÅ‚aw
  KwiecieÅ„

PROFILE:
• Current Job:  Financial analyst at XTB Poland
• Career: Advisor to the Minister of Finance in Poland. Market economist at Millennium S.A, Poland.

View profile at FXstreet.com

PrzemysÅ‚aw KwiecieÅ„ is an advisor to the Minister of Finance of Poland. He has done research and forecasts on the economy and the fiscal policy, and cooperation and advising at the preparation of MF’s official documents (budget assumptions, convergence programme, debt strategy, euro adoption strategy). He excels in market research and advising to debt officers. He has also done research and forecasts on the Polish economy, the US and the eurozone economies.

Do you believe the considerable drop in the price of metals on Chinese markets over the weekend and the soft exports numbers are signs of an economic slowdown taking hold in the country?

China is a complex problem. A target growth has been achieved by maintaining unhealthy structure. The government announced plans to make the economy more consumption oriented long ago but since then it went in a directly opposite way. The housing sector is now making up for more than 15% of the GDP and that's obviously not sustainable. The PBOC tried to cool it down slowly hoping that other parts of the economy will pick up the tab - as for now it's not working and to me, China is a ticking bomb. Investors need to observe actions taken by the PBOC (and/or government) carefully. Each intervention now means a deterioration in the future. If the PBOC stays put, we may anticipate a slowdown to become entrenched with a broader impact on the markets, beyond Chinese equities and copper.

Is the Ukraine crisis heading towards a peaceful resolution already or can it still take a turn for the worse in your opinion? Do you agree that the markets are underestimating the gravity of the situation?

Ukraine is puzzling for markets because it's beyond economics. Certainly things can get worse. Any sanctions leading to a halt or a major decline in energy resources export from Russia would be very dangerous for a very fragile European economy. European economy is finally experiencing a moderate recovery but it's bound to face headwinds from China. Therefore more trouble is the last thing Europeans want and need which explains reluctance in this area.

What do you think will be the implications of the Ukraine crisis in Poland?

It's a broad question. Economically the key risk is oil and natgas prices (in the near term). Poland - in theory, could replace oil from Mid-East but surely the price tag would be higher. Natgas is impossible to be replaced in a smooth fashion so a chemical industry would suffer. Any benefits of pro-European Ukraine are far beyond the horizon.

What do you expect from the FOMC meeting next week?

We expect a taper of 10bln USD. The Fed just got a decent payrolls and retail sales data which should be enough for Yellen to believe that the spring will bring a pick up in activity.

Despite the turmoil in emerging markets, the USD has not been able to leave the 3.000 area against the PLN, why? What are you forecast in the USDPLN for the next months? Why does the Euro refuse to fall against the USD?

We see the USD finally regaining some ground both against the euro and the zloty with USDPLN reaching 3,15 in Q2. We were more bullish on the dollar at the start of the year expecting an interest cut by the ECB but it's now clear it aint happening any time soon. Yet as the US economy proves strong following a harsh winter the dollar should be back in favor and still able to earn modest gains vs euro and CEE currencies.