U.S. Dollar Vs. Commodities: Correlation Confusion

  • The US Dollar Index notched a very strong April amid turmoil in Europe and Asia
  • Traditional asset class relationships have bucked trends in 2022
  • Any pullback in commodities is likely a buying opportunity as the year progresses

The US dollar had one of its best months of the last decade in April. The trade-weighted dollar index measures the greenback versus six major currencies. The euro is the biggest driver, making up 58% of the ICE futures US Dollar Index (DXY). The yenBritish pound, and Canadian dollar are other components. Traders can easily play the USD via the popular Invesco DB US Dollar Index Bullish ETF (NYSE:UUP).

USD Surges in 2022 Amid A Volatile Macro Backdrop

Our Global Cross Asset Market Monitor report sent each Monday morning reviews where the macro landscape stands before a busy week. With the DXY hitting its highest level since December 2002 recently, investors are clearly bracing for relative strength in the US currency. The Euro area continues to endure skyrocketing producer and consumer prices while Japan faces its own issues with supply constraints related to China’s zero-COVID lockdown measures. The relative bright spot is the CADUSD – the Loonie is still more than 10% above its 2016 and 2020 lows vs the USD