Heading into the second half of the year, sterling leads the 2024 performance as it is the only currency in the group to post gains vs the U.S. dollar, GBP/USD rises nearly 2.0% YTD. The Japanese yen is down 10.9% to the dollar so far, however, it has trimmed losses in recent sessions
As the first half of the year is closed, I'm curious to see which factors or economic indicators are more correlated with G10FX performance.
Inflation seems to be out of traders' minds, this doesn't mean that an inflation print is not capable of moving intraday rates, but it means that inflation rates do not explain 2024 performance
Growth has a bit more of traction than inflation. The worst currency in the group, the Japanese yen, records the only output contraction in the G10 at -0.7%. However, the highest real GDP prints in the group are not the best currency performers
Implied volatility sees the lowest percentile outperform the rest of the group. The Canadian dollar holds the lowest 3m IV at 4.7%, but the Australian dollar outperforms with the tenor at 8.2%. Volatility explains less than a quarter of G10FX 2024 performance
Deposit rates, a measure we track for carry trades, has the best explanation to YTD currency moves and holds an R^2 of 0.51. The chart below shows currencies with the highest depo rates outperforming currencies with the lowest rates (Carry). Historically popular funding currencies like the Swiss franc and the yen rank the lowest, while the British pound and the Australian dollar outperform YTD
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