What is Correlating in the FX Space? - Nomura
Analysts at Nomura were scanning 2,000 cross-market correlations and
they find that nominal rate differentials continue to be strongly
correlated to FX.
Key Quotes:
"Notably the case with EUR/AUD, AUD/NZD, AUD/USD and EUR/GBP, which are
correlating heavily with either 2yr or 5yr rate differentials."
"Consistent with the an ongoing shift in global sentiment to a more
risk-averse environment (which has seen Chinese stocks decline last
week), the correlation of AUD/USD and the Hang Seng stock index entered
into the top 10 list of positive correlations this week."
"The largest negative correlations continue to be dominated by equities
and euro crosses, particularly against the AUD. While the general
picture is similar to the relationships we highlighted two weeks ago, it
is worthy to note that commodity prices (Gold, Silver and Copper) seem
to have continued to assert themselves in a strong fashion, particularly
against USD and EUR crosses with commodity currencies."
"The biggest two-week (negative) changes in correlations continue to
involve the commodity space, especially copper and oil. Similarly,
changes in the correlations to the Shanghai Composite index have been
significant relative to where they were two weeks ago (both positive and
negative). Once again, we believe this reflects how the recent
resurgence in global risk aversion is affirming its gravitational pull
on currencies most closely linked to the global growth cycle."
