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.

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.

Ashraf Laidi
Ashraf Laidihttp://ashraflaidi.com/
Ashraf Laidi is an independent strategist and trader, founder of Intermarket Strategy Ltd and author of "Currency Trading & Intermarket Analysis". He is the former chief global strategist at City Index / FX Solutions, where he focused on foreign exchange and global macro developments pertaining to central bank policies, sovereign debt and intermarket dynamics. Ashraf had also served as Chief Strategist at CMC Markets, where he headed a global team of analysts and led seminars and trainings in four continents. His insights on currencies and commodities won him several #1 rankings with FXWeek and Reuters. Prior to CMC Markets, Laidi monitored the performance of a multi-FX portfolio at the United Nations, assessed sovereign and project investment risk with Hagler Bailly and the World Bank, and analyzed emerging market bonds at Reuters. Laidi also created the first 24-hour currency web site for traders and researchers alike on the eve of the creation of the euro. Laidi's analysis of currency markets stand out based on his distinct style in bridging the fundamental and technical aspects of the markets. Laidi regularly appears on CNBC TV (US, Europe, Arabia and Asia/Pacific), Bloomberg TV (US, Asia/Pacific, France and Spain), BNN, PBSs Nightly Business Report, and BBC. His insights also appear in the Financial Times, the Wall Street Journal and Barrons. He has given numerous interviews and lectures in Arabic, French, and to audiences spanning from Canada, Central America and Asia/Pacific.

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