Cross-market GBP correlations dominate the top 10 (positive) correlations - Nomura

Research Team at Nomura, suggests that cross-market GBP correlations now dominate the top 10 (positive) correlations.

Key Quotes

‘In terms of positive correlations, nominal rates differentials and various GBP crosses continue to be very strong. New additions to the top 10 positive correlations include the correlations between GBP crosses and various 10y sovereign bond yields (Germany, and U.S.).

Similarly, on the negative correlation side, new top relationships include EURGBP and 10y sovereign bond yields. Correlations to implied volatility no longer appear in the top 10 list, while oil, precious metals and stock market returns continue to have strong correlations with various FX crosses.

The largest two-week (negative and positive) changes in correlation are now dominated by stock market index returns, as well as 10y sovereign bond yields to various EUR crosses (mostly EURUSD). For example, the (positive) correlation between EURUSD and DAX shot up significantly in the last two weeks. Various correlations between commodity prices and commodity FX continue to feature in the top two-week changes in correlations.”