Dollar closes at R$5.074 awaiting Copom; Stock market remains stable

The dollar and the stock market closed the first session of the week practically stable. The North American currency closed with a slight increase of 0.08% and closed the day at R$5.074 this Monday (6) amid a relatively mild climate abroad and with wide expectations for the Bank’s monetary policy meeting. Brazilian Central.

Ibovespa closed the day with a slight drop of 0.03%, at 128,465.69 points.

The value of the dollar reported daily by the press, including the UOL, refers to the commercial dollar (learn more by clicking here). For those who are going to travel and need to buy currency at exchange brokers, the reference is the tourist dollar, and the value is much higher.

What happened

The focus of the week will be on speeches by authorities from the Fed (Federal Reserve), the US central bank. This comes after, last week, the bank’s chair, Jerome Powell, practically ruled out the possibility of further interest rate hikes this year.

Additionally, weaker-than-expected employment data lifted global optimism. The numbers released on Friday keep hopes alive that the Fed will cut its key rate once or twice in 2024.

The market expects the Fed members who will speak throughout this week to choose caution. According to Diego Costa, head of exchange for the North and Northeast at B&T Câmbio, investors are also waiting for members of the US Central Bank to ask for more evidence of a slowdown in inflation and the job market.

The Brazilian market awaits the Brazilian Central Bank’s monetary policy meeting. The BC will close its two-day monetary policy meeting on Wednesday (8) in a scenario of renewed uncertainty that led the BC president, Roberto Campos Neto, to open the door in April for the Copom to reduce the pace of cuts in the Selic , currently at 10.75%, despite its most recent future guidance indicating maintenance of the 0.50 point pace.

Economists consulted in a Reuters survey were divided on the pace of monetary easing. The majority now believes in a slowdown to 0.25 points, although a significant portion believe in maintaining the 0.50 point step. Implied probabilities in interest rate futures contracts show almost a 90% chance of the BC cutting the Selic rate by just 0.25 percentage points this week.

In general, the more the Federal Reserve cuts interest rates and the less the BC relaxes local monetary policy, the better for the real. This is because, the greater the interest differential between Brazil and the USA, the more interesting the domestic currency becomes for use in “carry trade” strategies, in which investors take out a loan in a country with low rates and invest this money in a more profitable market.

However, many market participants have sounded the alarm. For them, if the BC’s eventual decision to slow down easing is motivated by high fiscal uncertainties, this could nullify the positive effect of “carry” for the real, since the health of public accounts is also a factor taken into account for investment decisions. investment.

(With Reuters)