US
USD is down, unwinding yesterday’s rebound. Still, the dollar index (DXY) remains anchored within a tight 99.00-99.50 range in place since mid-May. KRW continues to underperform across the board, with USD/KRW surging to near 1550.00, the highest level since March 2009.
Meanwhile, the KOSPI index is the worst performing stock market today, down more than 5% and nearly 10% below the record high reached earlier this week. The rare tandem decline in KRW and KOSPI reflects a double blow of AI rally fatigue and the ongoing energy shock.
USD and Treasury yields will take their cue today from the May non-farm payrolls (NFP) (1:30pm London, 8:30am New York). Consensus is looking for NFP gains of +88k vs. +115k in April. Bloomberg’s whisper number is higher at +99k. The unemployment rate is seen unchanged at 4.3% for a third consecutive month, a tick below the FOMC 2026 projection (4.4%), and average hourly earnings is expected to rise 0.3% m/m vs. 0.2% in April.
As a bit of an experiment, I asked Bloomberg’s AI interface (ASKB) to calculate the implied May NFP change based on ADP private payrolls, Revelio employment, ISM employment Manufacturing, and ISM employment Services. The answer is +179k, which is higher than the most optimistic Bloomberg analyst forecast of +125k.
More importantly, NFP gains in the three months to April averaged 48k per month, well within the breakeven range that is necessary to keep the unemployment rate steady given the slowdown in overall labor force growth. A recent Fed research note estimates the breakeven pace of employment growth to average 18k in 2026.
Bottom line: additional evidence that US labor demand is stabilizing would reinforce the US growth outperformance story and underpin a firmer USD. In contrast, soft labor market data can trigger a dovish repricing of Fed funds futures against USD.
CANADA
USD/CAD is trading near the top end of its year-to-date 1.3500-1.3950 range. Canada’s May labor force survey is the domestic highlight (1:30pm London, 8:30am New York). The economy is expected to add +10.0k jobs in May vs. -17.5k in April and the unemployment rate is forecast to remain at 6.9% for a second straight month.
Canada’s labor market is showing increasing signs of slack with employment contracting by an average of -29k in the three months to April. As such, a continued decline in labor demand can ease Bank of Canada rate hike bets (50bps in the next twelve months) and weigh on CAD.
JAPAN
USD/JPY continues to trade in a tight range near the 160.00 intervention zone. Japan’s April labor cash earning data was mixed. Total nominal wages quickened more than expected to a 16-month high at 3.5% y/y (consensus: 3.1%) vs. 3.1% in March. But the less volatile scheduled pay growth for full-time workers unexpectedly cooled to 2.6% y/y (consensus: 3.0%) vs. 2.7% in March.
Encouragingly, real wages are up 1.9% y/y vs. 1.4% in March which is a tailwind for household consumption. Overall, Japan wage growth is not a major source of inflation pressure given annual total factor productivity growth of about 1%. Indeed, almost all underlying CPI indicators Japan dropped further below 2% in April.
Bottom line: the bar for a further hawkish repricing of the Bank of Japan (BOJ) tightening path is high, limiting USD/JPY downside potential. The swaps curve has virtually fully priced in a 25bps BOJ rate hike to 1.00% at the next June 16 meeting and a total of 66bps of tightening in the next twelve months.
INDIA
The Reserve Bank of India (RBI) left the policy rate at 5.25% for a third consecutive meeting and maintained its neutral stance. 32 of the 38 analysts polled by Bloomberg expected no change, the rest had a 25bps hike penciled in.
INR outperformed across the board because India rolled out a set of packages to draw in foreign capital. The RBI alongside the government announced today measures aimed at strengthening India’s balance of payments by attracting more capital flows. The RBI introduced five measures (details here) that make it easier for foreign investors to buy government bonds and stocks and encourage foreign currency deposits.
In parallel, the government granted tax exemption to foreign institutional investors retroactively from April 1, 2026 on “any interest on government security, and any capital gains arising from the sale, exchange or transfer of such government security.” See here for details.
Nonetheless, until the energy shock fades, these steps to bolster capital inflows are more likely to slow INR depreciation than unwind its massive undervaluation. India is a net crude oil importer with around half of its oil imports passing through the Strait of Hormuz.
