Dollar Struggles as Global Bond Yields Normalize

The US dollar is struggling as bond yields normalize in major economies.

This normalization is leading to rising Treasury yields, which are increasing borrowing costs for governments and businesses alike. In the past two decades, the US national debt has increased substantially, with federal debt-service costs projected to rise from 2.1% of GDP to 3.3% in 2026 and potentially reach 4.6% by 2036.

This trend is not limited to the US, as German bond yields have climbed back to their highest levels since 2011, French yields have returned to those seen in 2008, and Japanese yields are at their highest since 1996.

The S&P 500's pullback from record highs and rising Brent prices should have strengthened the case for EUR/USD bears. However, the major currency pair has moved higher amid concerns about the Fed's slow response to normalization.