'I expect the first Fed rate hike in the second quarter of 2015' - 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.

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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 share Mario Draghi's optimism on the first TLTRO take-up and consider it acceptable? Do you expect the next, December operation to be more successful? Will we see increased lending to small businesses and households as a result?

Draghi must be an optimist but obviously there are concerns. The European economy is getting out of steam at the very early stage of recovery and there's not much the ECB can do about it. Ironically second TLTRO allotment might be more successful if Draghi cuts sovereign QE speculations short.

What is your shot at the possible timing of the first Fed rate hike? What would push the FOMC to make the decision?

I expect the first move to take place in the second quarter of 2015. The FOMC will like to take some time before the QE termination and the first move and some time ago there was a rumor it might take 6 months. While Yellen underlines the decision will be data dependent she's only half-honest. If the US economy expands as projected they will take those 6 months and act, if not then obviously they will wait longer.

How gravely could the war with ISIS affect global oil markets?

The impact might be between moderately negative to even slightly positive. ISIS rebels occupy areas that are not crucial for oil exports so unless they succeed in devastating Iraq (as a state) completely, the "war" should have a limited impact on the oil balance. Meanwhile, the US finds a somewhat unexpected ally in Iran in the war on ISIS so ironically the oil balance may improve if the sanctions on Iran are lifted.

EUR/USD remains trading under pressure amid Draghi's dovish and speculations that Fed will hike rates soon. After recent comments on hiking rates in 2H 2015, do you think EUR/USD bearishness could be moderated? Targets?

Judging on some money market metrics the EURUSD begs for a correction so with that in mind bears should beware. However, in a long term it will be hard to find a reason to be long ED for as long as a) market rates in EUR are negative b) the US economy expands at least in line with the Fed's projections.

US dollar bullish plus a weak Japanese yen put the USD/JPY at 109.00; however the rally seems contained, why? Any target in the middle term?

The UJ is a bit tricky right now. The market speculates about the fresh easing moves (perhaps accompanying the second sales tax hike) but there's no confirmation or even indication from the BoJ. When the pair skyrocketed above 107 there was no news at all and only after a while we learned that the BoJ accepted negative rates at reverse repo operations. So while I wouldn't dare shorting the pair, I do not feel informed enough to be going long either.

Do you see a floor in the AUD/USD?

A mid-term relationship with the FRA market points at 0,85-0,86 so there is still a bit to go. Steel prices in China decline as well and while here the relationship is not linear it obviously exists and is pointing to ca. 0,8 right now. Furthermore, there is still substantial risk of a hard-landing scenario in China. AUDCAD seems to be a nice alternative for bears weary of the USD volatility risk.