With
this knowledge of correlation, let's look at the following tables, each showing
correlations between the major currency pairs during the month of February
2010.
The
upper table above shows that over the month of February (one month) EUR/USD and
GBP/USD had a very strong positive correlation of 0.95. This implies that when
the EUR/USD rallies, the GBP/USD has also rallied 95% of the time. Over the
past 6 months though, the correlation was weaker (0.66) but in the long run (1
year) the two currency pairs still have a strong correlation.
