FX Strategy Presentation

J.P. Morgan adopts a 'Bullish beta, bullish USD' stance for the second half of 2026, driven by US exceptionalism and resilient carry trade returns. The report emphasizes staying long high-yielders and utilizing cheap FX volatility through defensive hedges.

Key Takeaways

• 1.Transitioned to a 'Bullish beta, bullish USD' view, expecting USD strength amid US exceptionalism and Fed hiking cycle.
• 2.Carry trades remain a preferred strategy, particularly in EM high-yielders and G10 high-beta currencies (AUD, NOK).
• 3.FX volatility is screened as historically cheap, and a defensive long-vol position is recommended for 2H.

Table of Contents

• FX Strategy Presentation: Bullish beta, bullish USD
• Top macro trade recommendations for 2H'25
• Trade recommendations
• Carry has been a consistent driver of returns in FX, while dollar themes have been less rewarding
• What is driving FX returns?
• The macro landscape in 2H26: inflation stays sticky, global growth recovers but US exceptionalism lingers
• Key political risks; US midterms remains the focal point
• AI is now established as a core macro theme, and has started to tilt more USD bullish
• FX hedge rebalancing will be a less relevant theme in 2H
• Moderate bullish bias for FX volatility in H2
• Risk scenario roadmap
• JPY: Stay bearish for domestic and global factors; USD/JPY 4Q 164
• EUR: keep using as a funder on softer data and lack of carry...
• Neutral GBP: Trade tactically over summer given balance between politics and carry.
• Fast T.E.A.M.
• FXO Themes In Play
• FX forecasts (1 of 2)
• FX forecasts (2 of 2)
• Disclosures

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