I had noticed over the past few months that the Euro and the U.S. stock market appear to be positively correlated, but I had no explanation for the phenomenon. When the S&P 500 moved higher, even on an intra-day basis, so did the Euro. Now today, I saw this on dailyfx.com:
The Euro/US Dollar has held a near record-high correlation to the US S&P 500, emphasizing that both currencies are firmly linked to global risk trends. The recent upturn in global risk markets bodes poorly for the US currency. Indeed, S&P 500 losses were a key source of support for the historic safe-haven currency. Yet recent events suggest that the US dollar may in fact lose its safe-haven status against major world currencies. The US Federal Reserve’s Quantitative Easing has sparked fears that the USD will lose its luster as a reserve currency. It will be critical to watch EUR/USD – S&P correlations going forward.
