BNY's Head of Markets Macro Strategy Bob Savage highlights that the U.S. Dollar has remained in a 95–99 range even as the LME Metals Index has surged, breaking a long-standing negative correlation. He notes that the USD index’s link to Fed policy is different this cycle, with fewer 2026 rate cuts priced, while ongoing FX hedging demand and risk reduction temper any strong Dollar rally.

Correlation break with LME metals

"The negative correlation between the U.S. dollar and the LME Metals Index is long-standing and significant."

"What stands out is when that correlation breaks, as it has in 2026."

"The U.S. dollar has traded in a 95 to 99 range while metals prices have surged – a divergence not seen since COVID."

"Scarcity and stockpiling now explain more of the price action than real-rate valuation dynamics."

"The USD index’s link to Fed policy also differs this cycle, with investors pricing fewer 2026 rate cuts."

"However, the dollar has not rallied back, suggesting that ongoing FX hedging demand still plays a significant role. FX risk reduction and supply-chain concerns suggest global investors fear broader financial instability more than a panic USD collapse."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)