'High chance ECB will introduce additional easing measures in Q4' - 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 BoE to improve its interest rate communications at the upcoming meeting to reduce uncertainty? What could happen if Carney continued sending confusing signals to the markets?

In my opinion, Mark Carney will keep sending confusing signals to the markets. From one side he will be stating that he is getting investors ready for interest rate hikes by the BoE, from the other side trying not to make the Pound appreciate to much. Carney is trying no to allow a high GBP/USD rate, unsuccessfully so far. The UK economy is strong enough that the markets expect and interest hike soon, despite what BoE representatives say officially. Till now, investors were able to rate the economy well, despite the BoE's mistakes.

What could push the ECB to adopt further easing measures and when could that happen in your opinion?

I see a high chance the ECB will introduce additional easing measures. This could happen in the last quarter of this year. The factors that could push the ECB for such a move include inflation in the Eurozone remaining at low levels (and not rebounding) and disappointing GDP growth in countries like Italy and France.

Does the fact that Eurozone inflation remained unchanged in June mean that the threat of deflation in the area is weakening?

It seems we are close to inflation lows and from there it should rebound. On the other hand, we cannot rule out a situation in which we will observe deflation in a single month. I believe that if deflation will not realize this year, the threat of it happening, will be gone.

Why is the Dollar weak this days?

These days the market is searching for higher yielding currencies. We go back to the times when carry trade strategies have been popular. The AUD/USD and the NZD/USD are an excellent example. The Dollar is relatively strong to the euro and the yen because the interest rates are almost the same.

The GBPUSD is trading at 2014 highs, do you see the Cable recovering the pre-recession levels?

Conviction on a quicker then previously expected rise in interest rates in the UK is the main factor supporting the pound. Looking at the FRA market, we can come to a conclusion that the GBP/USD can move even towards 1,7500 in the next couple of weeks. In my opinion, pre-recession levels (above 2.0000) are not achievable at this time as the USD is expected to gain during the second half of 2014. I also do not see the BoE allowing the Pound to gain so much in the upcoming months.

Experts are calling for USD/JPY at 97.00 before retaking its uptrend, what do you think?

At this moment, the 101,20 and 102,70 levels are the most important. If 102,70 is broken we expect a further upward movement towards 105. However, if 101,20 is broken then yes, we can assume that the market moves towards 97 and then we should see another rally again to the 105,00 level.