What is Correlating in FX? - Nomura

What is Correlating in FX? - Nomura

5 May 2016, 14:49
Roberto Jacobs
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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.”


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