Forex Investment and Currency Trading

There is no doubt that the correlation between oil prices and various Dollar crosses has risen notably over the last few years. But it matters how you measure this correlation. For example, if you calculate the correlation between EUR/$ and WTI in levels over the last year, you will get a figure around 95%. This is misleading, however, as the two variables have been trending in the same direction over the period, and that will tend to generate misleadingly high correlations.
To get a better sense of the underlying link, it is more informative to look at correlations in changes. Looking [...]

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Aluminium
Three-month prices slumped by 9% from a high of USD 3,250/tonne (t) in early March to a low of USD 2,808/t in the second half of March. The market was hit by a triple whammy of bearish news. First, there was a general selloff in the industrial metals, as recession fears gripped the market following the collapse of US investment bank Bear Sterns. Second, there was a big jump in LME stocks. Aluminium inventories rose from 947 thousand tonnes (kt) at the end of February to 1.02 million tonnes (mt) in mid-March - representing a high 9.8 days of global [...]

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Gold
The gold price finally broke above the magic USD 1,000/oz level in mid-March, as a combination of extreme weakness in the USD and fear about problems in the US banking sector resulted in a rush into safe haven assets. However, the price fell sharply after this, hitting a low of USD 904/oz at one point as some of this money was withdrawn. This recent reduction was largely driven by investors being forced to liquidate gold holdings to offset loses elsewhere, rather than indicating a fundamental reassessment of gold’s prospects. Physical gold demand should be boosted by this recent price fall, [...]

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Commodity markets have corrected sharply lower as concerns over the scale of financial sector problems have intensified. The correction began on 13 March, but steepened on the 18 March, following disappointment in the magnitude of the Fed’s most recent rate cut, a rebound in the USD (which is believed to be temporary) and a general round of profit-taking to offset losses elsewhere. Also, the recovery in the US equity market in particular
appeared to attract funds away from commodities over the past week, indicating the growing links between these markets as investment in commodities as an asset class has increased.
This is [...]

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Crude oil prices continue to set new highs despite rising inventories and signs of slowing demand growth. While physical market balances appear to be loosening, financial demand for crude oil continues to grow and, coupled with the weakness in the US dollar, is likely to provide support in the near term. The sell-off across commodities following a prominent US bank’s demise underscored the increased vulnerability of energy commodities in times of liquidity concerns and overall risk reduction.
Crude oil started this year rallying above $100 and the roar and thunder has only strengthened since, with the prompt month now comfortably in [...]

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