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July 10, 2026

Elias Haddad

Japan homecoming trade fuels rally in JPY, JGB, and Nikkei.

Canada June jobs data on deck.

BCRP holds rates and signals no rush to tighten.

USD remains on the backfoot, and crude oil prices steadies after yesterday’s pullback. Markets are treating renewed US-Iran strikes as another round of managed escalation with technical talks between the two sides continuing.

There are no policy-relevant US economic data due today. We still expect the dollar index (DXY) to edge a bit higher in the near-term. US-G6 two-year bond yields are consistent with DXY trading closer to 102.00 and US economic outperformance should keep rate differentials supportive of the dollar.

JAPAN

Japan homecoming trade drives rally in JPY, JGB, and the Nikkei. Japan Finance Minister Satsuki Katayama said “One priority is to encourage households, as well as pension funds including the GPIF [Government Pension Investment Fund], to increase their investment in Japanese financial assets. We intend to pursue policies that support that objective.”

Japan is one of the world’s largest net creditors. Japan’s stock of net foreign assets totaled roughly $3.6 trillion in Q1 or 83% of GDP. As such, even a modest portfolio repatriation could generate meaningful JPY demand.

CANADA

USD/CAD is directionless just under 1.4200. Canada’s June labor force survey is the domestic highlight (1:30pm London, 8:30am New York). The economy is expected to add +10.0k jobs in June vs. +87.8k in May and the unemployment rate is forecast to remain at 6.6% for a second straight month.

USD/CAD is trading in line with US-Canada 2-year bond yield differentials. But there is room for Bank of Canada rate hikes bets (50bps in the next twelve months) to adjust lower, leaving USD/CAD biased higher.

Leading indicators point to a soft labor market. Job vacancies have fallen to their lowest level since October 2017, the share of businesses reporting labor shortages declined further below its historical average, and hiring intentions over the next twelve months worsened in Q2.

PERU

PEN faces headwind from Peru’s near negative real rates. As was widely expected, Peru’s central bank (BCRP) kept the policy rate unchanged at 4.25% for a 10th consecutive meeting. BCRP suggested the bar to tighten is high despite inflation overshooting the bank’s 1% to 3% target range.

According to BCRP, this deviation from the inflation target range mainly reflects higher fuel prices and their indirect effects on transportation costs in March and April. Excluding the transportation component, core inflation stood at 1.6% y/y and has remained below 2% since April of last year.

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