The USD: not the commodity currency you’re looking for

The US dollar and the prices of major commodities, in aggregate, have often risen and fallen in tandem since 2021, in contrast to their strong inverse relationship for much of the past two decades. While we wouldn’t go as far as classifying the greenback as a “commodity currency”, we think several key developments – notably, the shift in the US’ energy trade balance from a large deficit to a marginal surplus – have brought the USD-energy correlation to roughly neutral, with important knock-on effects for other major currencies.