What is correlating in the FX space? – Nomura

By FXStreet 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 …read more

Source:: FX Street