Dollar falls sharply and closes at R$5.06, with a weaker job market in the USA; Ibovespa rises | Economy

The dollar closed sharply lower this Friday (3), with investors reflecting the release of new data from the United States labor market. Ibovespa, the main stock index on the Brazilian stock exchange, ended on a high.

The country created 175 thousand new jobs in April, against an expectation of 240 thousand and below the 315 thousand registered in the previous month.

These numbers are watched carefully because they can be decisive for the next steps of the Federal Reserve (Fed, the American central bank), in relation to the country’s interest rates scenarios.

There is an expectation that the institution will start cutting rates in the second half of the year, depending on the direction of inflation and economic activity.

See below for a summary of the markets.

At the end of the session, the dollar fell 0.85%, quoted at R$5.0697. At the day’s low, it reached R$5.0449. See more quotes.

As a result, he accumulated:

• drop of 0.91% in the week;
• decline of 2.37% in the month;
• gain of 4.48% in the year.

The previous day, the North American currency closed down 1.53%, sold at R$5.1134.

Ibovespa ended with an increase of 1.09%, at 128,509 points.

As a result, he accumulated:

• increase of 1.57% in the week;
• advance of 2.05% in the month;
• losses of 4.23% in the year.

The day before, the index rose 0.95%, to 127,122 points.

Understand what makes the dollar rise or fall

This Friday, the market reflected the release of the United States non-agricultural jobs report, known as payroll. The indicator, which is one of the main measures evaluated by the Fed in its monetary policy decisions, came in below market expectations.

According to the Department of Labor, 175 thousand job vacancies were opened outside the agricultural sector last month. Economists consulted by Reuters predicted 243,000 job openings.

March data was revised upwards, showing the opening of 315 thousand jobs, instead of 303 thousand.

Like this, the unemployment rate in the US rose from 3.8% to 3.9%, even below 4% for the 27th consecutive month.

Wages rose 3.9% in the 12 months to April, following a 4.1% rise in March. Wage growth in a range of 3% to 3.5% is considered consistent with the Fed’s 2% inflation target.

Employment data is closely watched in the world’s largest economy because it provides an overview of the effect of high interest rates in the country on the job market.

Lower-than-expected numbers raise the prospect that the high interest cycle in the United States has had the desired effect on the economy. This is because, with fewer jobs, less money in the hands of the population and, also, less pressure on inflation.

“In recent months, there has been no new progress towards the 2% inflation objective”, reported the collegiate, reinforcing that recent indicators of the North American economy continued to expand “at a solid pace”.

Annual inflation in the United States is stagnant at around 3%, after spiking throughout 2022 and reaching a record level of 9%. Despite the drop, the price indicator did not return to within the Fed’s target, which is 2% per year.

Therefore, the institution continues to send signals to the market that interest rates in the largest economy in the world may take longer to fall. According to the FedWatch tool, which brings together market projections for interest rates in the United States, a rate cut cycle should only begin in September — or even after that.

However, the Fed also signaled that it does not plan further interest rate increases, which is beneficial for the market.

Higher interest rates in the USA end up driving investments into the largest economy in the world, which takes money away from other markets, especially emerging ones, such as Brazil. Otherwise, if interest rates there fall, the tendency is for the impact to be positive here.

With the Fed’s decision on the radar, investors are now awaiting the next meeting of the Monetary Policy Committee (Copom), which takes place on May 8.

Although the committee signaled, at its last meeting, that it would make another cut of 0.50 percentage points (pp) next Wednesday, analysts indicate that this promise could be broken. The most likely, however, is that this cut volume will be maintained.

Understand better in the article below:

The credit rating is used by investors to assess which countries or companies the investment is safer in. If the note is lower, the risk is greater – which, in economics, means charging higher interest rates.

“Another highlight of Moody’s was the [nota divulgada sobre a] Petrobras, with the agency warning about possible government interference that could represent credit risks for the company, such as the use of the state-owned company to cover the fiscal deficit or price controls to contain inflation”, stated the foreign exchange director for the north and northeast of B&T Câmbio, Diego Costa.

On the indicator agenda, emphasis is placed on industrial production data, released by the Brazilian Institute of Geography and Statistics (IBGE). The indicator rose 0.9% in March compared to the previous month, practically in line with analysts’ estimates of 1%.

As a result, the sector ended the first three months of the year with a 0.3% increase in production compared to the previous three months, marking the fourth consecutive quarter in the black.