Reverse Correlation
BNP Paribas | Feb 15, 2017 04:12AM ET
The negative correlation between prices of oil and metals, on the one hand, and the USD on the other hand, which was the rule since 2003, has reversed in the course of 2016. On the one hand, the recovery in industry and construction in China and growth acceleration in the US have triggered upward pressures on commodity prices again. On the other hand, US monetary tightening and the reduction in the energy trade deficit in the US, thanks to the development in shale gas & oil, are supportive factors for the USD. Are those factors expected to last? Probably yes regarding the USD. But, the recovery in commodity prices remains fragile because supply of commodities may adjust relatively rapidly to demand, especially for oil, and there remain downward risks on the Chinese growth.
by François FAURE
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