'ECB could cut rates and initiate another LTRO in June' - Adam Narczewski, XTB Poland

 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.com

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.

Do you expect the presidential elections in Ukraine to be carried out smoothly this weekend? What is the most possible outcome in your opinion?

The situation in Ukraine has calmed down a little bit, but still there might be problems with carrying out the elections in the eastern parts of the country. Separatists will want to show their strength so the police and army should be prepared. As the recent polls show, the highest chance to win the election has Petr Poroshenko, who is supported by "Maidan" and has pro-market views. If the elections are carried out successfully and Poroshenko wins, it should be good news for the markets.

Do you believe that the ECB's easing action in June will include a reduction to both the deposit and the repo rates? What other moves might the central bank make?

Yes, June is the month when I expect some action from the ECB as a reaction to the current economic conditions in the Eurozone. The main refinancing rate could be cut by15bp to 0%, while the deposit rate, which currently stands at 0%, could lowered to -10bp. Additional measures are also a possibilty and my money is on another LTRO round. It would not be 300bln EUR as I have heard recently, but a an amount much lower than that.

Why has volatility in the foreign exchange market been so subdued of late? What could cause a shift and when could that happen?

Low volatility has been a major problem for speculative traders in the recent months so I imagine all of them praying for shift to happen as soon as possible. Why volatility is so low? It can be attributed to the low interest rates differential between currencies from one side, and very stable and predictable monetary policies by major central banks. Most of them, including the Fed, BoE and the BoJ, has not been surprising markets and their actions are widely expected. This is good for the economy, bad for speculation. It is tough to predict when the shift will take part, but interest rates need to widen in order to give more trading possibilities. Also, once in a while, some other central bank than the ECB (we can always count on Super Mario!) could deviate from their standard policies.

The EUR/USD remains around 1.3700 as he pair has been unable to break below 1.3650; Experts suspect large stops below it so if broken, how far could be the selloff?

Currently, we are expecting a break above 1,3730 and a move towards 1,3770 or maybe even to 1,3850. However, if the 1,3650 level is broken, the market can decline to the next support at 1,3500.

Do you see the USD/JPY falling below the 100.00 level?

Yes, if the market closes by the end of the week below 100,70 on the daily chart. If so, the next target for bears is located at 99,50.