What is Correlating in FX? - Nomura
Research Team at Nomura, suggests that after scanning 2,000 cross-market
correlations, they find that nominal rate differentials have started to
assert themselves.
Key Quotes
“Notably, EUR/AUD, AUD/NZD and EUR/GBP are correlating heavily with either 2yr or 5yr rate differentials.
In
a sign of greater rates market correlation, USD/JPY is now correlating
as much with US 10yr yields as it is with the Nikkei. This underpins the
notion that the US macroeconomy is behind some of the moves.
EUR/USD
correlations are not high enough to feature in the top 10 tables. It is
currently correlating most strongly with rate differentials and
(inversely) with equities.
The largest negative correlations are
dominated by equities and euro crosses, as we already observed last
week. New entrants into this top 10 list include correlations with
commodity prices, particularly between USD/JPY and Gold and USD/NOK and Silver.
The biggest two-week changes (positive or negative) in
correlations involve commodity space, especially copper and oil (similar
to last week). A whole range of currencies have become more correlated
with copper, while the correlations with oil continue to grow both on
the negative and positive side.”
