Commodities are getting a demotion from foreign-exchange strategists.
Banks from JPMorgan Chase & Co. to Citigroup Inc. are reducing the weighting given to exports in their currency forecasting models as policy makers tighten their grip on financial markets. Traditional commodity currencies, such as those of Canada, Australia, New Zealand and Norway, have become decoupled from exports by the most in as much as 13 years.
“The breakdown in correlations has been significant,” Niall O’Connor, an analyst at JPMorgan in New York who specializes in tracking trends in trading patterns, said by phone on June 25. “It’s central-bank talk that’s really become the catalyst for price action.”
From the U.S. Federal Reserve to the European Central Bank and Bank of Japan, policy makers are showing little appetite to stop stimulating their economies after the World Bank lowered its global economic growth forecast last month. The delinking of commodity prices and the currencies of nations that rely heavily on exporting raw materials is upending one of the most established relationships in global markets.