Societe Generale’s Kit Juckes links the Dollar’s trajectory to shifting interest rate and growth differentials, noting that US 2-year Treasury yields have surged since the war with Iran while the Dollar Index has only modestly advanced. He argues the Dollar still has room to rally, with the bank’s end-2026 DXY forecast above Bloomberg consensus.

US yields outpace peers, backing Dollar

"Still, the chart below of the Dollar Index and 2-year Note yields, does tell an interesting story. The dollar was already rallying before the Presidential election and continued to do so until January 2025."

"From September 2025 until the outbreak of the war with Iran, 2-year Treasury yields stayed low, in a 3.4-3.7% range despite strong economic growth, an investment boom and signs of inflationary pressures at the margin. Over the same period, the Dollar Index meandered around in a 96-101 range, with EUR/USD trading between 1.14 and 1.21."

"The war changed the interest rate outlook, with 2-year yields rising by over 6% since it started. The dollar has rallied, but only modestly compared to the rate moves we are seeing."

"Even so, the trend (US 2-year yields rising faster than we are seeing elsewhere) is clear enough."

"The day between a Europe-wide holiday and the weekend isn’t a good time to make bold predictions about what will happen next, but the dollar has room to rally from here."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)