'There's no good alternative to the USD' - Przemysław Kwiecień, XTB Poland

 Przemysław
  Kwiecień

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

Przemysław Kwiecień 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.

The EUR/USD is all about the ECB and the FED: with the first launching stimulus, and the second planning a rate hike; who do you believe will win the battle? can the USD resume its advance, despite the overwhelming number of shorts already there?

The thing here is that there’s just no good alternative to the US dollar. There are many on the markets arguing that the USD trade is overcrowded and that things have moved too far given uncertainties regarding a path of rate increases but they rarely point to a currency capable of absorbing a weakness of other currencies. Moreover, while the FOMC performed a dovish tilt in March the market overreacted and right now even a September hike is not discounted. Should we see a de ja vu from last year when the data improved along weather, the hike in June or July might be back on the table. We’ve been bullish on the greenback for a year now and we maintain this bias.

The next major payment (again to the IMF) is on May 12th so to me this is a hard deadline. Marketwise 24th of April might be important as well as sides set this date as a deadline to agree on Greek reforms. Right now I do expect a deal to be struck before the May date at the latest.

I would not be worries about the GBP if it was only politics. In fact such situations proved to be a good opportunity to buy the weakness in the past (just check the Scottish referendum). However, the market lost faith in a hike this year and until such expectations are restored it will be hard for the GBP to gain traction. Money market wise the GBP looks undervalued but as I said, there’s no momentum in the data to help the currency. Perhaps it will be a better buy around the elections date.

The pair has diverged from the Nikkei precisely because of reluctance from the BoJ to promise more. Therefore the rally relies mostly on the USD and given some uncertainties here I would not expect the pair to move much higher quickly. I am still biased towards longs but these should be picked on the dips.

There are not many factors other than USD weakness that could get gold prices higher. ETFs continue to shed the metal and a physical demand does not grow quickly enough to fill that gap. Since we expect the dollar to keep appreciating, gold prices should decline over a medium term.