Dollar advances as quarterly US inflation data offsets weaker-than-expected GDP

The dollar began to rise against the real in the first deals this Thursday, after lower-than-expected data on activity in the United States were offset by a surprise rise in quarterly inflation, amid greater caution about the trajectory of the Federal monetary policy. Reserve.

At 9:53 am (Brasília time), the dollar in cash rose 0.29%, to 5.1639 reais on sale, abandoning the stability seen at the opening. On B3, the first-month dollar futures contract fell 0.09%, to 5.1525 reais on sale.

Data on Thursday showed that US economic growth slowed more than expected in the first quarter, but an acceleration in inflation suggests the Federal Reserve will not cut interest rates anytime soon.

US gross domestic product (GDP) expanded at an annualized rate of 1.6% last quarter, the Commerce Department reported. Economists polled by Reuters had forecast growth of 2.4%, with estimates ranging from a 1.0% pace to a 3.1% rate.

Putting pressure on markets, data showed that the core PCE price index accelerated to 3.7% in the quarter, above expectations of 3.4%.

On Friday, monthly data for the PCE inflation index will be released, which, because it is preferred by the Federal Reserve, could have a greater impact on markets than the GDP reading.

Global markets have experienced a wave of risk aversion recently, as resilient US data and tough talk from Fed officials led traders to predict just two 0.25 percentage point cuts in US interest rates in 2024. Between the end From 2023 to the beginning of this year, markets were betting on up to 1.50 percentage points of monetary easing in the period.

“This repricing that began (with the postponement of bets on interest rate cuts) from March to June, is now being postponed from June, perhaps to September, but many people are already talking about even December and perhaps signs that this rate will not be cut in 2024”, said Matheus Pizzani, economist at CM Capital.

“So you realize that there are several scenarios and none of them are very positive when we think about our foreign exchange market.”

In Brazil, external uncertainty added to local fiscal risks and has affected the outlook for monetary policy, with the president of the Central Bank, Roberto Campos Neto, warning that there could be a slowdown in the pace of easing, which led to an increase in market projections for the Selic level at the end of this year.

“This reduction (of the interest rate differential between Brazil and the USA), in theory, could help the real, yes, but this movement to reduce international liquidity takes away some of this mechanical understanding. Then you have to look at the situation, within this situation (the interest rate differential) does not have the same adherence, solely and exclusively due to this international issue.”

In theory, a slower pace of monetary easing in Brazil would be positive for the real, as this would better preserve the profitability of the fixed income market, attracting foreign investors.

The day before, the spot dollar closed the day at 5.1492 reais on sale, up 0.40%.