19/10/20 – G10 FX Correlations Weekly

  • G10/USD 30-day rolling correlations to the S&P 500, Stoxx 600 and Commodity Index increase, while correlation to gold remains stable and to WTI are more mixed.
  • CADUSD now has highest positive 30-day correlation to both the S&P 500 and WTI out of the G10/USD pairs.

G10 FX sensitivity to “risk” (equities)

30-day rolling correlation between major G10 USD crosses and the S&P 500 for the most part strengthened last week, as can be seen in Chart 1. CAD and NOK dollar crosses are the most sensitive to the S&P 500, with 30-day correlations above 0.7. AUD, NZD, SEK and GBP crosses are the next most sensitive, with 30-day correlations between 0.5-0.6.

EURUSD has seen its positive 30-day rolling correlation to the S&P 500 strengthen to above 0.4, synonymous with an increase in the strength of the negative correlation between the S&P 500 and the Dollar Index (DXY) to below -0.5. Meanwhile, USDJPY continues to have next to no correlation to the S&P 500.

As shown in Chart 3, G10 currencies have also shown an increase in their sensitivity to European equity markets, which struggled last week on increased fears over the impact of rising Covid-19 cases in Europe and the economic impact of renewed lockdown restrictions.

Chart 1
Chart 2
Chart 3

G10 FX sensitivity to gold

It was a choppy one for gold last week; early in the week, USD strength sent the precious metal crashing back beneath the $1900/oz mark. By the end of the week, however, much of these losses had been recovered. As can be seen in Chart 4, correlations to G10/USD major crosses have stayed broadly stable; AUD, NZD, NOK, EUR, SEK and CHF dollar crosses all still have positive 30-day rolling correlations to gold of above 0.6, while GBP, CAD and JPY dollar crosses still have the weakest correlations to gold. DXY continues to have a strongly negative correlation to gold of just above -0.7.

Chart 4

G10 FX correlations to (front-month) WTI

A somewhat mixed week in terms of the evolution of G10/USD cross 30-day rolling correlations to WTI; as can be seen in Chart 5, DXY, GBPUSD, EURUSD and CHFUSD all saw the strength of their correlations to WTI soften significantly. DXY’s negative 30-day correlation to WTI is now above -0.3. AUD, SEK, NZD dollar crosses all saw their 30-day correlations remain broadly stable, while CADUSD saw a jump in the strength of its positive correlation to WTI to around +0.5. The cross now has the highest correlation to WTI out of the G10/USD majors, overtaking GBPUSD.

Chart 5

G10 FX sensitivity to the Commodity Index

In contrast to the above, USD saw the strength of it negative 30-day rolling correlation to Refinitiv’s basket of global commodities (the Commodity Index) strengthen last week to below -0.6.

Thus, G10/USD cross in general saw their correlations to the Commodity Index rise (see Chart 6). This dynamic was not just driven by USD, however, with most JPY major crosses also seeing a substantial rise in their 30-day rolling correlation to the Commodity Index (see Chart 7).

NOK, CAD, AUD and NZD are unsurprisingly still the most Commodity Index sensitive currencies, and JPY the least.

Chart 6
Chart 7

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