'If inflation continues to disappoint in the near future, ECB will act again' - 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.

Will the ECB take further action in the coming months to boost exports in the Eurozone in order to stimulate growth in your opinion? What could the central bank do?

I don't think the ECB will target the exports sector per-se. The mandate is clear, it includes inflation only and that's what the ECB will look at in the first place. Growth and the components are important for as long as they shape the inflation outlook. Disappoint growth creates deflationary environment and obviously it's something the ECB wants to avoid at all cost. But the link is more complicated here and leads through the inflation outlook which on itself has been very shaky in the recent months. So for me the inflation readings will be crucial. Should inflation continue disappoint on the downside in the near future, the ECB will act again, most likely by starting the asset purchases program.

When do you expect the BoJ to exit its ultra-loose monetary policy? What could prompt the central bank to do it earlier than generally expected?

There is no timetable for the BoJ to withdraw and actually for now the discussion is if the BoJ has done enough or will it do more late this year or early next. Right now, lots of the data from Japan, with inflation at the front, is blurred by the sales tax hike (in April) which creates a comfort for the BoJ to do nothing. If the underlying inflation is on track to meet the 2% target in 2016 as the BoJ expects, there is no reason to expand the policy further.

Do you believe Portugal' Banco Espírito Santo troubles could considerably hurt Eurozone recovery? How do you think the situation will be resolved?

It looks like the Banco Espírito Santo is an isolated case. It matters because it takes place not long before the ECB overtakes the supervision over the most of the EMU banking sector. Under circumstances of low growth and high scrutiny banks are unwilling to expand their credit action briskly to disappointment of the ECB.

Is there a game change in the EUR/USD after Janeth Yellen's speech on interest rate and dovish economy? What is your touch on the pair?

I dont think Yellen was a game changer and in fact it looks like the move on the pair was a delayed reaction following the FOMC in June and the latest payrolls. Yellen said nothing new but some US economist believed the dot-chart didn't matter for as long as Yellen takes a spot lower than a consensus. By identifying with the consensus (even if her personal expectations might differ) she made it clear, that those 3 hikes next year (shown by the chart) are indeed to be expected. I see the pair moving lower this year and the next as the US market rates increase and EUR rates stay low.

The GBP/USD is trading at multi-year highs just below 1.7200, do you expect further gains in the air or a renewal USD appetite that drives the pair down?

The GBPUSD is a tricky business. The GBP on its own still has a room to appreciate given a risk of a hike in Q4 of this year, strong labor market and the recent uptick in inflation. Bo so has the USD. I would be cautious with going long the cable right now and would feel more comfortable shorting EURGBP or even more going long GBPCAD given the "serial disappointment" on the CAD side.