• US ISM services, Canada Jobs, Nordic CPI, and Japan wages in focus.

• Peru, India set to hike. Poland to hold.

• Brazil vote to drive BRL.

Check out our latest Mind on the Markets quarterly here. The feature is on how the US midterms can influence financial markets.

USD rallied against all major currencies last week, with the DXY index making new cyclical highs in line with widening US-G6 interest rate differentials. In parallel, the global bond market selloff deepened, driven by a tighter expected policy path, crowding-out effects due to the increasing bond issuance of large tech firms and concerns over sovereign debt sustainability.

Friday’s soft September nonfarm payrolls (NFP) took some steam out of the USD rally, by reducing odds of a back-to-back Fed funds rate hike in October. Still, the report remains consistent with a stable labor market and does not challenge the Fed’s tightening bias. That’s why the relief rally in Treasuries proved short-lived.

NFP gains in September surprised to the downside at +29k (consensus: +90k), while the prior two months were revised down by a combined -60k. The unemployment rate unexpectedly rose 0.1ppt to 4.2%, 0.1ppts higher than consensus and the FOMC 2026 projection. And average hourly earnings growth slowed to 3.0% y/y vs. 3.1% in August, the lowest since May 2021.

More broadly, the economy averaged +50.7k jobs per month in the three months to September, indicative of an economy near full employment. Also, the increase in the jobless rate reflected stronger labor supply rather than weaker hiring as the participation rate rose 0.2ppt to 61.8%.

Tighter policy elsewhere and a growing case for an October Fed pause are USD headwinds. But US growth outperformance and strong foreign appetite for US securities keep USD risks skewed to the upside.

This week’s data calendar is relatively light, leaving markets to digest last week’s moves rather than respond to a major new catalyst.

ISM Services in Focus, Fed Minutes in the Rearview

September Services ISM survey (Monday). The data should remain indicative of resilient economic activity and sticky inflation pressures. The headline index is seen at 55.0 vs. 55.4 in August, and the Prices Paid index is expected at 73.2 vs. 72.6 in August.

The September New York Fed and October University of Michigan consumer surveys are due Wednesday and Friday, respectively. Both surveys should continue to show that longer term inflation expectations remain anchored.

The September FOMC minutes (Wednesday) are likely to look somewhat dated after recent calls for patience from key Fed officials (Williams, Jefferson, and Bowman). Recall, the FOMC’s September hike came with a clear hawkish tilt and unanimous backing.

Canada’s Sluggish Labor Market

Canada’s September labor force survey is due on Friday. The economy is expected to add just +5.0k jobs after losing -41.7k jobs in August. The unemployment rate is seen rising 0.1ppt to 6.5% on an unchanged participation rate of 65.0%, pointing to weak labor demand.

BOC rate hike pricing (100bps in the next twelve months) looks too aggressive and leaves CAD vulnerable to a dovish repricing. Canada core inflation is near the banks’ 2% target and indicators point to continued excess supply in the economy.

Nordic CPI to Keep Hawks in Play

Sweden September CPI (Wednesday). CPIF is expected at 1.5% y/y vs. 0.7% in August while CPIF ex-energy is projected at 0.7% y/y vs. 0.5% in August. That would match the Riksbank’s projection and back the case for a 25bps policy rate increase to 2.00% at the next November 4 meeting (78% priced in). Of note, adjusted for temporary fiscal policy measures, such as lower taxes on fuel and food, inflation is closer to 2%.

The Riksbank noted in September that “the policy rate should be raised more going forward than projected in the June forecast” and signaled again it expects “the increases to the policy rate will begin this year.”

In the next twelve months, the Riksbank’s policy rate forecast implies nearly 75bps of tightening to 2.50% while the swaps curve price in 100bps of hikes to 2.75%. That limits policy divergence with the Fed and is a headwind for USD/SEK.

Norway September CPI (Friday). Headline is expected at 3.6% y/y (Norges Bank: 3.5%) vs. 3.3% in August and underlying CPI is seen at 3.0% y/y (Norges Bank: 2.9%) vs. 3.0% in August. At its last September meeting, the Norges Bank increased the policy rate 25bps to 4.50% and signaled preparedness to “raise the policy rate further if warranted by the inflation outlook.”

As such, faster underlying inflation can firm up odds (currently 50%) for one more 25bps hike to 4.75% by year-end, while a cooler print would argue for a longer pause. Regardless, Norway’s attractive carry remains a key tailwind for NOK.

Japan Wages No BOJ Game Changer

Japan August labor cash earnings data (Wednesday). The latest Tankan business survey points to continued firm regular earnings growth, not an accelerating wage inflation spiral. That should keep the bar high for a more aggressive BOJ tightening cycle and keep USD/JPY within a broad 155.00-160.00 range in the near term. BOJ Governor Ueda speaks on Tuesday.

Central Bank Watch

Peru’s central bank (BCRP) is expected to raise the policy rate 25bps to 4.50% (Thursday), ending a year-long pause at 4.25%, following its September 2025 cut. We agree. Inflation in Peru has been above target for too long and the economy is operating with a small positive output gap. Tighter policy, alongside the uptrend in copper prices bode well for PEN.

National Bank of Poland (NBP) is widely expected to keep the policy rate at 3.75% for a sixth straight meeting (Wednesday). We expect a hawkish hold which can offer PLN support. Inflation in Poland is gaining traction above the bank’s target range and Governor Adam Glapinski Glapinski warned last week that the mood within the Monetary Policy Council is “wintery, hawkish.” The swaps curve implies over 100bps of tightening to between 4.75%-5.00% in the next twelve months.

The Reserve Bank of India (RBI) is expected to raise the policy rate 25bps to 5.50% (Wednesday), after keeping rates on hold at 5.25% all year. Inflation in India is within the RBI’s target band. But we anticipate the RBI to hike to defend INR and respond to stronger growth, with Q2 real GDP of 7.8% y/y beating the bank’s 6.4% forecast.

Brazil’s First Round Showdown

Brazil’s polls close at 5pm Brasilia time on Sunday and results should come relatively fast. Incumbent leftist President Luiz Inácio Lula da Silva of the Workers’ Party (PT) holds a narrow edge over rightist Senator Flávio Bolsonaro of the Liberal Party (PL) going into the first round. However, neither is expected to clear the 50% threshold, setting up an October 25 runoff that remains too close to call.

Bolsonaro’s plan for faster fiscal repair and lower taxes would add to the positive BRL outlook, already underpinned by Brazil’s attractive carry and strategic exposure to commodities linked to energy, AI, and defense. Meanwhile, Lula’s greater tolerance for rising debt will likely slow the appreciation in BRL. Brazil’s gross public debt has risen from 71.7% of GDP when Lula took office in January 2023 to 82.5% of GDP in July 2026, the highest since 2021.