Ceteris Paribus

Ceteris Paribus, what does it mean?  Read on. How good is good enough? That's the growth question in 2017 and the answer is increasingly that mediocre is an FX winner. The pound was the top performer and the only currency to have risen against the USD on Tuesday, while the Swiss franc lagged. China inflation data is up next. USDJPY was stopped out and a new JPY trade was issued.  Below is the Premium video, dissecting the spectacular fall in volatility relative to lack of gains in the Dow over the last 14 days.

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The US dollar flexed its muscles for the second day on Tuesday. USD/JPY climbed above 114.00 before closing just below on North Korea nuclear test worries. EUR/USD sank below 1.09 as the Macron trade continued to unwind.

At the end of the day, the FX market is a beauty contest. But in 2017 it's more of a small town pageant than Miss Universe. US economic data has been mediocre for weeks and the Atlanta Fed cut its Q2 GDP forecast Tuesday. Yet, Ceteris Paribus (holding other things equal in Latin), growth around 2% with a central bank hiking rates and no obvious domestic risks is good enough for the US dollar, assuming no real developments elsewhere. We will need at least 4 weeks before judging whether Macron's presidential success translates into parliamentary success.

In addition, it's the second week of the month and that means the US economic calendar is light and broader market volatility is ultra low. Meanwhile, Fed officials continue to brush off weak growth in a sign that they want to hike in June.

The main event on the upcoming calendar is the China CPI for April. The consensus is for a 1.1% y/y rise, that's an increase from 0.9% in March. With inflation so low, the latest moves by Chinese officials to cool the economy seemingly don't make sense. But the 'dual mandate' of China's government isn't just economic growth, equally important is stability and efforts to curb credit growth are more about attempting to de-risk the economy.