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Our short-term value-correlation trackers find the following:
EUR/USD:
- The most correlated markets are CNH, gold, Euro real estate markets, euro swap spreads and euro cross-over.
- These suggest that EUR/USD is being driven more by euro risk rather than central bank policy.
- Most of these suggest EUR/USD should be trading closer to 0.97 than 0.99 based on 3m correlations.
USD/JPY:
- The most correlated markets (with the correct sign) are German yields, Japan swap spreads, US yields (nominal and real) and 10y real yield spreads.
- These suggest US yields continue to drive USD/JPY.
- Most of these suggest USD/JPY should be trading closer to 147 to 150 based on 3m correlations.