According to the WP_Query docs:
Pagination Note: Use get_query_var(‘page’); if you want your query to work in a Page template that you’ve set as your static front page. The query variable ‘page’ also holds the pagenumber for a single paginated Post or Page that includes the Quicktag in the post content.
Display posts from current page on a static front page:
$paged = (get_query_var('page')) ? get_query_var('page') : 1;
$query = new WP_Query( array( 'paged' => $paged ) );