Given the high volatility in currency markets recently, we take a look at the correlations with other markets. Here we use our G10 FX drivers tools
AUDUSD Losing Correlation with Commodities
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Short-term (1m) correlation of AUDUSD with the CRB commodity index has turned surprisingly low over recent days. This suggests to us that even if commodity prices fall, there is potential for AUDUSD to rally further. A similar but less dramatic observation can be made for NZDUSD too. GBPUSD’s correlation with both equities and commodities remains similar but lower than in March.
EUR and GBP More Sensitive to Equities
Using a regression of various drivers versus EURUSD and GBPUSD, we see that both currencies are being driven more by the performance of equities than at the beginning of the year. The positive value also shows that both EUR and GBP appreciate in line with the MSCI World.
2y Yield Differential Matters for USDJPY
The 2y yield differential between US 2y and Japanese 2y matters more for the movements in USDJPY than the relative steepness of the two curves (2s10s).
