Currency Correlations

Currency pairs do not move in isolation. They share currencies - EUR/USD and EUR/GBP both contain the euro, so euro strength affects both pairs. They share the US dollar - USD/JPY and AUD/USD are both affected by dollar movements, in opposite directions. Market data from the Bank for International Settlements (BIS) confirms that capital flows link these exchange rates globally.

What Is Currency Correlation?

Currency correlation is the statistical relationship between the price movements of two currency pairs over a defined period. It is expressed as a correlation coefficient between -1.00 and +1.00. A coefficient of +1.00 means the two pairs move in perfect lockstep. A coefficient of -1.00 means they move in perfect opposition. A coefficient of 0 means no measurable relationship.

In practice, correlations vary over time as market conditions change. A correlation of +0.85 between EUR/USD and GBP/USD means that approximately 85% of the time, when EUR/USD moves in one direction, GBP/USD moves in the same direction.

Positive and Negative Correlations

Key Correlations Every Trader Knows

Certain correlations are stable enough over time to serve as reliable general rules - though always verify current correlation data before relying on them.

How Correlations Affect Risk

If you hold a long EUR/USD position and a long GBP/USD position simultaneously - with 2% of your account at risk on each - you do not have 2% risk on two independent trades. You have effectively 4% risk on a single bet: that the US dollar will weaken.

Using the Correlation Tool

Our free Currency Correlation tool shows you the correlation coefficients between major pairs in a clean matrix format. Check current correlation data weekly rather than relying on historical relationships as fixed rules.