BMO's McCormick Says It's Still Right to Be Long Dollar

Summary

BMO Chief FX Strategist Mark McCormick argues that the US dollar remains the right trade as the global economy enters a new macro regime distinct from the pre-war 'Goldilocks' environment. He expects increased volatility from data surprises and policy adjustments, and recommends specific FX pairs to express a long dollar view, including shorting the Australian dollar and the Korean won, while avoiding the euro.

• Mark McCormick advocates a long US dollar position as the core trade.
• He argues the market is wrong to assume a return to the pre-conflict low-rate, weak-dollar environment.
• A new macro regime is beginning, characterized by a terms of trade shock favoring commodity exporters.
• Increased data dependency and wider consensus will lead to more surprises and higher volatility.
• Specific implementation ideas include selling the AUD/USD and targeting a higher USD/JPY.
• The euro is seen as unattractive due to fading equity outperformance narratives.
• Commodity-importing currencies like the Korean won and Japanese yen are expected to remain weak.
• The thesis is driven by evolving global factors, not just short-term war premium pricing.