What is correlating in FX? – Nomura

Research Team at Nomura, suggests that the cross-market GBP correlations have shot up and in terms of positive correlations, nominal rates and various GBP crosses are now very strong.

Key Quotes

“On the negative correlation side, volatility and GBP crosses have become very closely linked. Elsewhere, oil and commodity currencies continue to have strong correlations.

The largest two-week (negative and positive) changes in correlation continue to be dominated by the commodity space, with the negative correlation between GBPUSD and gold strengthening significantly in the last two weeks.

Similarly, the correlation between GBP and the 10Y UST yield picked up markedly, consistent with risk-off moves observed running up to and directly following the ultimate Brexit vote outcome, which saw a strong rally of around 30bps on the U.S. curve.”