26th October 2020 – G10 FX Correlations Weekly

Correlations breaking down ahead of US Presidential election

26th October 2020 – G10 FX Correlations Weekly

Correlations between major G10 FX pairs and equity and commodity markets broadly weakened last week, as focus increasingly turns to next week’s US Presidential election.

G10 to equities

As Charts 1 and 3 show, DXY’s negative 30-day rolling correlation to the S&P 500 and Stoxx 600 weakened by between 0.1-0.2. Similar drops in the strength of USD majors positive correlation to the S&P 500 and Stoxx 600 were also witnessed; CADUSD remains the most sensitive to both indices, while JPYUSD continues to have virtually no correlation to either.

Moreover, as Chart 2 shows, AUDJPY, NZDJPY, CADJPY and GBPJPY all saw substantial drops in the strength of their 30-day rolling correlations to the S&P 500 from around +0.6 to as low as +0.4 (for GBPJPY).

Chart 1
Chart 2
Chart 3

G10 to Commodities

30-day rolling correlations of most G10/USD major pairs drop to virtually zero over the course of the last week. The exception is CADUSD, which maintains a modest positive correlation to the front-month WTI crude oil futures contract of just above +0.2.

Chart 4

In contrast to the above, Chart 5 shows that G10/USD major pairs saw a much more modest decline in the strength of their 30-day rolling correlations to Refinitiv’s Commodity Index (WTI only constitutes around 25% of this index).

Chart 5
Chart 6

Gold is the exception – rolling 30-day correlations between Gold and G10/USD majors strengthened last week; EURUSD continues to have the highest correlation with the precious metal, which is at multi-month highs of around +0.8.

Chart 7

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