'Slightly higher chance for a Fed rate hike in June rather than September'

Adam
Narczewski

PROFILE:
• Current Job: Deputy Regional Director at XTB Poland
• Career: Market analyst at XTB Poland. Frequent guest of TV shows on TVN CNBC, CNBC Europe & World, Polsat News.

View profile at FXStreet

Adam Narczewski is currently the Deputy Regional Director and a market analyst at XTB Poland. He has explored the secrets of finance at Winthrop University in South Carolina (USA) where he acquired invaluable experience. He specializes in international markets, fundamental analysis and practical application of options and in investing. Trades forex on international markets and stocks on the Warsaw Stock Exchange. Adam is a candidate to the CFA designation, also a speaker on seminars regarding structured instruments, financial engineering and advanced financial instruments. Adam is a frequent guest of television programs in Poland - TV Biznes, TVN CNBC, CNBC Europe & World, Polsat News and radio show.

EUR/USD is trading at 1.1000 despite that most of traders were expecting a continuation of the bearish trend; What is your take in the pair? Levels?

The recent EUR/USD rebound should be attributed to the Fed, which surprised us with lower forecasts of the pace of interest rate hikes in the United States. I still believe in the USD regaining power and it's most recent depreciation I perceive as a good occasion for shorting the EUR/USD.

We will have a new release of the employment saga on April 3rd. What are your expectations for the NFP and the unemployment rate and how it will affect the USD?

The weekly Unemployment Claims reports have been great, showing the labor market is in strong condition. Due to this, I expect another solid reading above 250K. I expect this could be the trigger that could give power back to the USD and a turnaround on the EUR/USD chart.

It looks like markets have shifted their Fed rate hike forecast from June to September after last week's FOMC statement. How do you think this may impact other Central Banks' policy decisions?

I disagree with the market then! I still see a slightly higher chance for an interest rate hike by the Fed in June, rather than in September. If U.S macro indicators and the labor market show strong performance this spring, I do not see why the Fed should wait till the autumn. The major Central Banks will not change their monetary policy decisions because of the Fed hiking rates (either June or September, or just talking about hiking). Eventually, when interest rates will be increased, I expect that emerging markets' central banks could run into problems - they should consider hiking interest rates or at least stop cutting them lower.

Do you think the BoE could decide to cut rates to tackle deflationary forces? Could the BoE enter the currency war if the Fed turns more dovish?

Rather not. The data from the UK is solid, only wages and inflation are not increasing as strongly as the BoE would want them to. Still, analyzing the strenghtening labor market, we can come to a conclusion that wages will soon start increasing. In this case, I rather expect the BoE to hike interest but the earliest by the end of this year or beginning of the next one.

The USD/JPY is fiercely defending the 119.00/20 area; however it seems the pair is now heading south. What are your line in the sand before calling for a downtrend?

I certainly ain't calling for a downtrend yet. The corrective movement on the USD/JPY is mainly caused by similar movements on the USD and stock markets. I do not expect those corrective movements (on the USD and equities) to last long. That is why I see this as an opportunity to open long positions on the USD/JPY, especially that central bankers in Tokio will certainly want to avoid a stronger Yen.

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