Dollar is traded close to R$5.10 with caution before the Copom decision

The dollar accelerated its gains against the real this Wednesday, 8th, with investors waiting for the conclusion of the Central Bank’s monetary policy meeting amid uncertainty about the pace of easing, while risk appetite abroad was timid.

Around 12 pm, the dollar in cash rose 0.17%, to R$5.084 on sale, after having surpassed R$5.10 in the morning. The Ibovespa fell 0.03%, to 129,170 points. See quotes.

+ 0.25 or 0.50 point? Market bets on lower Selic cut in today’s Copom

“The market remains cautious, awaiting the Copom decision, scheduled for today… The market wants to know what the next steps are to anchor interest rate expectations that impact the economy as a whole,” said Matheus Massote, foreign exchange specialist at One Investments.

The moment is one of unprecedented uncertainty in the current monetary cycle regarding the magnitude of the cut to be announced by the Monetary Policy Committee (Copom) this Wednesday.

At its last meeting, the Copom had indicated maintenance of the pace of 0.50 percentage points, but since then global and domestic uncertainties led the president of the BC, Roberto Campos Neto, to open the door last month to a slowdown in the pace of cut to 0.25 points, turning market expectations upside down.

Previously certain that the half-point pace would be maintained, operators of interest rate futures contracts began to include almost a 90% chance of a more cautious adjustment of 0.25 points. The expectations of the Focus bulletin also changed, and this week began to show a reduction of 0.25 points, from 0.50 previously.

Divided, economists consulted in a Reuters survey mostly believe in a slowdown to 0.25 points, although a significant number believe in maintaining the 0.50 point step seen in the last six meetings.

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.

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

“In the background (of the Copom meeting), the impact of the calamity situation in Rio Grande do Sul on the economy continues to be a source of concern, especially given the challenging fiscal scenario and the deterioration of inflation expectations,” said economists at Guide Investments in reporting to clients.

Devastating floods that hit Rio Grande do Sul left at least 95 dead and 128 missing, according to the most recent report from the State’s Civil Defense, while survivors face shortages of food and basic supplies.

Faced with the tragedy, Congress approved on Tuesday the draft legislative decree that recognizes the state of calamity in Rio Grande do Sul, paving the way for the sending of federal resources to the State without this affecting the government’s fiscal target or implying non-compliance. of the Fiscal Responsibility Law.

The day before, the US currency in cash closed the day at 5.0681 reais on sale, a slight drop of 0.13%.