Maths or demand?
Okay, simple question, I understand the maths when it comes to a strong US dollar and $USD-priced commodities in a global market. But when does demand trump the maths? (pardon the trump pun).
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Answer
Hi David,
The correlation between the DXY and Copper futures (HG1) in 2026 is +0.10 — effectively near zero, indicating the two have moved largely independently this year. This is a notable departure from the historically negative relationship, with copper surging to record highs above 660 US/lb in June while the dollar has traded in a relatively tight range around 97–101. However, day to day it does feel “twitchy” as when then US$ advances copper has tended to fall, but the why is key here:
- Copper has slipped from its highs, following bonds lower/yields higher which are perceived as a weight on global growth.
Over the full ten-year period, the correlation is +0.27 — a weak positive relationship. This is somewhat counterintuitive given the conventional wisdom of an inverse US$/copper relationship, but it reflects distinct regime shifts over the period:
- 2017–2018: Both rose together as global growth accelerated, distorting the long-run relationship.
- 2022: The most pronounced inverse dynamic, DXY surged to ~112 while copper collapsed from ~4.70 to ~3.40 US/lb, consistent with the classic negative correlation.
- 2025–2026: Copper has broken sharply higher (5.00–6.60 US$/lb range) while the DXY has drifted lower, re-establishing a more traditional inverse pattern.
However, the simple long-run correlation hides the reasons why:
The 2022 tightening cycle produced the clearest inverse relationship, while today copper is being driven by structural demand themes (energy transition, AI infrastructure) rather than purely macro-FX dynamics.
- Specifically answering your question, we think Copper demand fundamentals will continue to out weigh the impact of the $US.
