Yields under pressure: Dollar strength threatens Euro

Rising yields on US Treasury bonds are increasingly putting pressure on the euro, which could lead to a slide to parity with the dollar, according to State Street Global Advisors. The recent surge of the dollar, reaching a multi-year high, runs parallel to the increase in the 10-year Treasury yield. According to Aaron Hurd, a portfolio manager at State Street Global Advisors, this could rise from the current approximately 4.8% to 5%. Hurd, although long-term skeptical about the dollar, had correctly predicted the rise of the US currency and tactically bet on dollar strength in the fourth quarter of last year. He stated: "The euro/dollar could break parity and might even fall below," should the Treasury yield reach the 5% mark. However, further weakening of the euro towards 0.95 would require new triggers, such as clarity on US tariff policy. These forecasts align with a growing number of predictions expecting the 10-year bond yields to rise to 5% and see the euro at parity with the dollar, as the designated US President Donald Trump keeps the Federal Reserve cautious about further rate cuts with potential tariff increases. However, market consensus continues to see the euro likely staying above 1.03 US dollars until 2025, and only two out of 52 analysts surveyed by Bloomberg anticipate US yields reaching 5% by the end of the year. Nevertheless, developments in the options market indicate an increasing possibility that the 10-year yield could reach the 5% mark. The last time the yield consistently stayed above this level was in 2007, just before the global financial crisis.