Dollar set for weekly drop as bond yields surge

The US dollar is heading for its first weekly loss in five weeks, pressured by rising long-term bond yields and renewed focus on America's growing debt burden. Thirty-year US Treasury yields stayed above 5%, while Japan's super-long government bond yields hovered near record highs and UK 10-year gilt yields reached their highest since mid-January. Market attention remains fixed on President Trump’s tax bill now moving to the Senate, and today’s data releases include UK retail sales and German GDP for Q1.

Equities

The FTSE 100 fell 0.5% on Thursday, while the FTSE 250 dropped 0.7%, as concerns over the US fiscal outlook and higher-than-expected UK borrowing figures weighed on sentiment. April’s UK budget deficit came in at £20 billion, above forecasts, raising fresh questions over public finances.

Among major UK companies, Shell and BP both fell 1.5%, pulled down by a 1% decline in oil prices. Budget airline easyJet lost 2.6% after publishing half-year results.

British Land dropped 5.4% after issuing a muted earnings forecast. In contrast, Johnson Matthey surged 30.7%, its strongest performance in nearly a year, after announcing the sale of its catalyst technologies business to Honeywell. QinetiQ rose 6.8% following a £1.5 billion, five-year contract extension with the UK government.

On Wall Street, the S&P 500 and the Dow Jones Industrial Average ended the day flat, while the Nasdaq rose 0.28%, helped by gains in technology shares. Treasury yields fell slightly, easing some pressure on equities after a sharp rise the day before. The yield on the US 10-year note dropped 5.4 basis points to 4.543%.

Alphabet climbed 1.3%, reaching its highest level in nearly three months. Amazon, Tesla and Nvidia also closed higher. Apple dipped 0.36%. Snowflake jumped more than 13% after it raised its fiscal 2026 product revenue forecast, bolstering investor confidence in its cloud services business. In contrast, Analog Devices fell 4.6%, even though it reported stronger-than-expected quarterly results.

First Solar slid 4.3%, hit by expectations that President Trump’s new tax and spending bill will bring an end to certain green-energy subsidies. The bill, which passed the House of Representatives by a narrow margin, includes measures that are forecast to increase the US debt by $3.8 trillion over the next decade, according to the Congressional Budget Office.

Forex & Commodities

The US dollar was weaker on Friday, heading for its first weekly decline in five weeks, as attention turned to the country’s deteriorating fiscal outlook.

The dollar index fell 0.3% to 99.614 and is on track for a 1.35% drop this week. The euro gained 0.36% to $1.132 and is set for a 1.2% weekly rise, while the yen rose to 143.47 per dollar, up 1.5% for the week, supported by strong domestic inflation data. The Swiss franc firmed to 0.8264 per dollar and is up 1.2% on the week.

Gold continued to benefit from the weaker dollar and safe-haven demand, climbing 0.3% to $3,303.09 per ounce. It’s up 3% for the week, on course for its best performance since early April. Gold’s rise comes as markets digest the US House’s approval of President Trump’s sweeping tax bill, which could add trillions to the national debt. Demand at a recent 20-year US Treasury auction was weak, compounding investor concerns.

Oil prices fell again on Friday, with Brent down 0.8% to $63.96 per barrel and WTI crude falling 0.8% to $60.72. Both contracts are heading for weekly losses—Brent by 2.3% and WTI by 2.9%. Prices have come under pressure on signs OPEC+ may raise production by 411,000 barrels per day in July. A Report  that Israel may be preparing strikes on Iranian nuclear sites and fresh sanctions on Russian oil briefly lifted prices earlier in the week but supply concerns have since taken over.