Skip to Content News Archives Economy Energy Oil & Gas Renewables Electric Vehicles Mining Commodities Agriculture Real Estate Mortgages Mortgage Rates Finance Banking Insurance Fintech Cryptocurrency Work Wealth Smart Money Wealth Management Investor Personal Finance Family Finance Retirement Taxes High Net Worth FP Comment Executive Women Puzzmo Newsletters Financial Times Business Essentials More Innovation Information Technology FP500 Podcasts Small Business Lives Told Tails Told Shopping Financial Post Store Obituaries Place a Notice Advertising Advertising With Us Advertising Solutions Postmedia Ad Manager Sponsorship Requests Classifieds Place a Classifieds ad Working Profile Settings My Subscriptions Saved Articles My Offers Newsletters Customer Service FAQ News Economy Energy Mining Real Estate Finance Work Wealth Investor FP Comment Executive Women Puzzmo Newsletters Financial Times Business Essentials HomeNewsEconomyU.S. dollar is best bet in new global regime of high rates, BMO saysA dollar gauge advanced about two per cent since the U.S. and Israel started bombing Iran in late FebruaryAuthor of the article:Last updated 1 hour ago You can save this article by registering for free here. Or sign-in if you have an account.The U.S. will issue May’s inflation data on Wednesday, and the median estimate for the annual rate is for an increase of 4.2 per cent in May, up from 3.8 per cent in the previous month. Photo by Xaume Olleros/BloombergBetting on continued United States dollar strength is the cleanest way for foreign-exchange traders to take a position on a new regime of higher rates and inflation, according to BMO Capital Markets.Subscribe now to read the latest news in your city and across Canada.Exclusive articles from Barbara Shecter, Joe O'Connor, Gabriel Friedman, and others.Daily content from Financial Times, the world's leading global business publication.Unlimited online access to read articles from Financial Post, National Post and 15 news sites across Canada with one account.National Post ePaper, an electronic replica of the print edition to view on any device, share and comment on.Daily puzzles, including the New York Times Crossword.Subscribe now to read the latest news in your city and across Canada.Exclusive articles from Barbara Shecter, Joe O'Connor, Gabriel Friedman and others.Daily content from Financial Times, the world's leading global business publication.Unlimited online access to read articles from Financial Post, National Post and 15 news sites across Canada with one account.National Post ePaper, an electronic replica of the print edition to view on any device, share and comment on.Daily puzzles, including the New York Times Crossword.Create an account or sign in to continue with your reading experience.Access articles from across Canada with one account.Share your thoughts and join the conversation in the comments.Enjoy additional articles per month.Get email updates from your favourite authors.Create an account or sign in to continue with your reading experience.Access articles from across Canada with one accountShare your thoughts and join the conversation in the commentsEnjoy additional articles per monthGet email updates from your favourite authorsSign In or Create an AccountorTraders in the US$9.5 trillion-a-day foreign exchange market are “too eager” to price in the U.S.-Iran war resolution, Mark McCormick, BMO’s chief FX strategist, wrote in a note on Monday. Oil prices may retreat after the conflict ends, but the inflationary effects will linger, fuelling higher rates globally and slower economic growth, which favours the U.S. currency, he said.“Even if oil retreats at the margin — a big if — inflation is unlikely to fall as quickly; second-round effects are building, and correlations are shifting in ways that increasingly favour higher rates and a stronger dollar over headline optimism,” McCormick said.Get the latest headlines, breaking news and columns.By signing up you consent to receive the above newsletter from Postmedia Network Inc.A welcome email is on its way. If you don't see it, please check your junk folder.The next issue of Top Stories will soon be in your inbox.We encountered an issue signing you up. Please try againBMO is staying broadly long on the dollar, especially against the euro, British pound and yen. McMormick’s team also expects the dollar to strengthen against the Australian and Canadian dollars.A dollar gauge advanced about two per cent since the U.S. and Israel started bombing Iran in late February. Though the war has upended global energy flows and hurt oil importing countries, the U.S. has weathered the higher energy prices and reported strong economic data. Traders have fully priced in a Federal Reserve interest-rate hike by the end of this year after May U.S. job growth topped all forecasts.The Bloomberg Dollar Spot Index had the best day in more than two months on Friday after the jobs report, and U.S. two-year yields, which are most sensitive to changes in U.S. central bank expectations, had the biggest one-day rise since President Donald Trump levied tariffs on most of the U.S.’s trading partners in April last year.The index edged lower on Monday after posting 1.1 per cent gains in the week prior.Consumer prices have been accelerating globally and in the U.S. Euro-area inflation topped three per cent for the first time since 2023 in May, cementing a case for rate hikes, eventhough the region’s economy is struggling.The U.S. will issue May’s inflation data on Wednesday, and the median estimate for the annual rate is for an increase of 4.2 per cent in May, up from 3.8 per cent in the previous month.“We think higher rates, weaker growth, and wider macro dispersion remain the more durable story — and that should continue to favour the dollar, and the outperformance of U.S. assets, in this evolving regime,” he said. “Headlines are noise; regime is the signal.”“Fed rate-hike bets look stickier given the U.S. economy’s resilience in the face of elevated crude prices. That’s supporting expectations for a higher neutral rate and rising inflation in the months ahead, which will help the dollar shake off its geopolitical hangover.”— Tatiana Darie, Macro Strategist, Markets Live. Join the Conversation This website uses cookies to personalize your content (including ads), and allows us to analyze our traffic. Read more about cookies here. By continuing to use our site, you agree to our Terms of Use and Privacy Policy.