What is driving

EUR/USD corporate
trading volume?
Using the causaLens AI platform
and CLS alternative data, we
are providing insights into current
FX market dynamics.
 Moody's AAA yield
TED spread
Brent crude
Adjusting currency hedging CCC High yield index

is one of the most critical 10y breakeven inflation

decisions facing CFOs, and 0 0.25 0.5 0.75 1

1. Macroeconomic factors and the predictive correlation with corporate EUR/USD transactions (January to April 2019)
strategies often hinge on
understanding the changes Predictive power for EUR/USD volume

in factors potentially TED spread

10y breakeven inflation
impacting FX volumes. CCC High yield index
Moody's AAA yield
WTI Oil
Gold fixing price
US treasury 10y yield
3 month LIBOR
S&P 500
Banks that execute hedging decisions need Methodology: Henry Hub gas
to understand the continuously changing market
USD/Yuan rate
conditions to achieve best execution. Due to Having warehoused the details of over 1 billion trades
Covid-19 and the subsequent market turbulence, across the 18 currencies, we have created the largest High yield OAS
this task has become increasingly challenging. single source of FX executed trade data available Brent crude
to the market. We provided causaLens with access
Using CLS’s FX Spot Flow dataset the causaLens 0 0.25 0.5 0.75 1
to our FX Spot Flow data which captures the volume
AI Platform examined the macroeconomic factors
purchased and sold, as well as the number of trades
associated with corporate EUR/USD transactions.
executed within the market. 2. Macroeconomic factors and the predictive correlation with corporate EUR/USD transactions (January to April 2020)
causaLens’s AI Platform processes a variety of
economic factors and carries out predictive signal Predictive power for EUR/USD volume
discovery at scale. In this instance, past and present data
USD/Yuan rate
points of economic factors were closely examined to
discover predictive variables for EUR/USD trading volume S&P 500
by corporates. High yield OAS
For this analysis, the causaLens AI Platform 3 month LIBOR
processed EUR/USD volumes in CLS FX Spot Flow data WTI Oil
by counterparty category (corporates, funds and
non-bank financials) together with a variety of daily Gold fixing price
macroeconomic indicators. Each data point was then Henry Hub gas
examined at scale for predictive signal discovery to US treasury 10y yield
identify specific primary macroeconomic factors having
a significant predictive relationship with corporates’ Moody's AAA yield
EUR/USD trading volumes. This exercise was TED spread
One of the key factors associated repeated for pre- and post-Covid-19 spreads. Brent crude
To ensure a fair comparison and to account for
with EUR/USD volumes traded by seasonality, we compared data from January to CCC High yield index

corporates was the TED spread. April for 2019 and 2020. 10y breakeven inflation

0 0.25 0.5 0.75 1

Before Covid-19

During Covid-19 Results: Predictive power for EUR/USD volume

TED spread is no longer a
significant factor associated with
corporate FX trading volumes.
We found that before the emergence of Covid-19, Conversely,TED
thespread
results for 2020 indicate that the Using the findings, CFOs and treasurers at corporates
one of the key factors associated with EUR/USD USD/Yuan rate
10y breakeven became the most significant factor
inflation can review their hedging strategies in light of their
trading volumes by corporates was the TED spread associated withindex
CCC High yield the trading volume of EUR/USD for exposures to the corresponding currencies. Market
– an indicator of perceived economic and credit risk corporates. This suggests that models including the participants can also use the analysis to help evolve
(chart 1).
Moody's AAA yield
USD/Yuan rate as a variable have greater predictive trading strategies that need to reflect changes in
WTI Oil volume than those without.
power for EUR/USD market dynamics resulting from Covid-19.
Interestingly, we discovered that during the
Gold fixing price
Covid-19 crisis the picture was almost inverted,
i.e. the TED spread is no longer a significant factor US treasury 10y yield
associated with corporate FX trading volumes (chart 2). 3 month LIBOR
S&P 500
Henry Hub gas
USD/Yuan rate
What is driving EUR/USD corporate trading volume? 02 What is driving EUR/USD corporate trading volume? 03
CLS Group | cls-group.com High yield OAS CLS Group | cls-group.com
Brent crude
 Background on data:
Since its launch in 2002, CLS has warehoused
the details of every trade by instrument (swap,
spot, outright forward) for the 18 currencies it
settles across 33 major currency pairs, creating
the largest single aggregated source of FX
executed trade data available to the market.

Background on the
causaLens AI platform:
causaLens is pioneering a completely
new approach to time-series prediction.
Almost all current machine learning approaches,
including AutoML solutions, severely overfit
on time-series problems and therefore fail
to unlock the true potential of AI for the
enterprise. causaLens was founded with the
mission to devise Causal AI, which does not
overfit, and so provides far more reliable and
accurate predictions. The platform also includes
capabilities such as autonomous data cleaning
and searching, autonomous model discovery
and end-to-end streaming productization.*

Settlement Processing Data * Source: causaLens website

CLS helps clients navigate the changing FX marketplace – reducing For more information please email data@cls-services.com
risk and creating efficiencies. Our extensive network and deep
market intelligence enable CLS specialists to lead the development
of standardized solutions to real market problems. Our innovative, London New York info@cls-group.com
forward-looking products make the trading process faster, easier, safer Hong Kong New Jersey cls-group.com
and more cost-effective – empowering our clients’ success. Tokyo

All views or opinions expressed in this document are CLS’s and do not reflect the position of any other organization. The information included herein does not constitute investment or financial advice and should not be relied upon as such.
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