'ECB really brought up massive guns against the euro' - 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 that ECB's move will effectively help combat low inflation?

The ECB presented us with a great package aimed at weakening the euro. Lowering interest rates plus injecting liquidity will cut into market rates discouraging flows, something that has kept the euro stubbornly high since December. Whether this will be enough to combat persistently low inflation remains to be see. Higher structural inflation requires strong demand and Europe is still in a debt hangover. ECB fights with this encouraging more debt, because that's monetary policy can do in situations like this. However, people in the EMU countries need to believe that future growth will be sufficient to pay back those debts and that requires sound (not necessarily restrictive though) fiscal policy, something Draghi pointed to on many occasions

When do you expect BoE to start rising rates? Could the growing risk of a housing bubble forming in the UK push the MPC to bring the move forward considerably?

I think the BoE will not act until the Q1'15 at the earliest but I think the hike will materialize only in Q2'15. The BoE might be strongly affected by the ECB decision and we saw Carney warning about strong GBP in the past. The housing trouble is not enough to prompt the MPC to increase rates.

Do you believe that this week's disappointing Eurozone PMI figures mean that recovery in the region is reversing? What GDP reading do you expect for the second quarter of the year?

I do not see a reversal at the moment. Recovery in the EMU is slow and will likely remain so this year with the pace of growth around 0,2-0,3% q/q ob average.

The EUR/USD is resilient to break below the 1.3570 area, do you expect the ECB pushing the pair below that in the longer term? 

As I said before, the ECB really brough up massive guns against the euro. Market rates that were elevated for couple of months will not be sort of limited by the 0,15% MRO, already lower than the market USD rates and what is more, extra liquidity should push those rates away from the MRO and closer to the depo rate. Since short term market rates are crucial for major currencies I cannot see how the euro might not depreciate against the dollar over the medium term

USD/JPY remains in range in between 101.00 and 103.00, do you see any further recovery in the upcoming days?

USD/JPY is in a clinch right now between robust global equities and monetary policy. Looking at the equities and a typical relationship with the JPY, the pair should be higher. Then again, the BoJ is clear that it's done with easing for the moment and that discourages traders to be aggressive long. Bond relationship points to 101 right now, so anywhere above 103 remains a sell for me