Yield Differential Still Seems in Charge of Euro versus US dollar

To show a market correlation is to show a market correlation.  That is about it.  The reason I say that is because we can never really be sure which of the pieces of price data in the correlation is leading and which is following.  And to go further, even if we did know which was leading we then run into the problem of then "forecasting" where the lead piece of price data is going in order to help "forecast" where the follower is going.  Thus, I think correlation analysis is useful, but it must be handled with caution.

In that vein, you have probably heard plenty of people trying to forecast currency prices using a forecast of interest rates. 

Read on ...

Currency Currents 25 July 2013

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