After a surge throughout April, the dollar started the first week of May in a fall. The US currency recorded a decline of almost 1% in the last five days and closed below R$ 5.10 for the first time in three weeks.
Much of the losses were accumulated last Friday (3), when the currency fell sharply after the release of data from the North American labor market and reached R$5.04 at the session’s low.
The dollar closed the day down 0.85% and at R$5.0698, the lowest value since April 9, when it reached the level of R$5.
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What brought down the dollar?
And it wasn’t just here that the dollar lost strength: across the planet, it fell sharply after the announcement that job creation in the United States was below expectations, according to data from the payroll released by the US Department of Labor.
Last month, the largest economy on the planet added 175,000 jobs, a number much lower than the Dow Jones consensus of 240,000. In addition unemployment rate rose to 3.9%, against expectations that it would remain stable at 3.8%.
The news reignited expectations that the Federal Reserve (Fed, North American Central Bank) will begin lowering interest rates before November. Lower rates in advanced economies encourage the migration of resources to emerging countries, such as Brazil.
The probability of a second US interest rate cut by the end of the year rose to around 72% after the payroll release, after falling to less than 50% the day before, according to data compiled by CME Group’s FedWatch tool. .
It is worth remembering that, on Wednesday (1), the president of the Fed, Jerome Powell, gave the formula for interest rates to start falling in the USA. At the time, the North American central bank kept the reference rate unchanged in the range between 5.25% and 5.50% per year — the highest level in more than two decades.
- The Fed needs to gain confidence that inflation is on a sustainable path toward the 2% target;
- An unexpected weakening of the North American job market.
But Powell warned: “weak labor market data and a mild inflation rate certainly will not cause us to start cutting interest rates. This is a scenario that does not give us any confidence that our 2% inflation target will be achieved in a sustainable manner.”
“Our decisions then will depend on the data, the overall data set, and we will also assess the economic risks of a rate cut,” Powell said, adding that the Fed’s decisions will be made on a meeting-by-meeting basis and will not be based solely on in a specific data.
*With information from Agência Brasil
