Dollar falls ahead of US inflation data; see quotation – 07/12/2023 – Market

The dollar opened lower on Wednesday (12), while investors await new inflation data in the United States that may give clues about the future of American interest rate policy.

The expectation is that data on price increases come in lower than expected and may justify fewer interest rate increases by the Fed (Federal Reserve, the US central bank) this year.

At 9:03 am (Brasília time), the spot dollar retreated 0.21%, to R$ 4.8519 in the sale. On B3, the dollar futures contract for the first month fell 0.03%, at R$ 4.8690. The day before, the spot dollar closed the day quoted at R$4.8619 on sale, down 0.43%.

The Brazilian Stock Exchange recorded a drop on Tuesday (11), even after the announcement that the IPCA (National Index of Consumer Prices) had deflated by 0.08% in June. Despite the drop in prices, the biggest for the month since 2017, the result was in line with market expectations and indicates a possible less aggressive interest rate cut by the Copom (Monetary Policy Committee) in August.

The dollar, on the other hand, started the day on a high against the real, but started to fall during the afternoon with the expectation that inflation data in the US may justify a faster end to the interest rate increases by the Fed (Federal Reserve, the bank Central America).

With that, the Ibovespa fell 0.61%, to 117,219 points, while the dollar ended the day with a devaluation of 0.43%, quoted at R$ 4.861.

In recent weeks, part of the market has started to bet on a cut of 0.50 percentage points in the Selic in August, mainly with expectations of inflation falling week by week. The figures released on Tuesday, however, did not reinforce this scenario.

The futures markets, incidentally, registered an increase after the release of the June IPCA. Interest contracts maturing in 2024 went from 12.81% to 12.84%, while those for 2025 rose from 10.75% to 10.76%.

The longer curves, however, fell this Tuesday: interest rates for 2026 rose from 10.12% to 10.09%, and those for 2027 fell from 10.15% to 10.11%.

As a result, the Brazilian Stock Exchange ended the day negative driven by falls in Petrobras (1.35%), Itaú (1.76%) and Banco do Brasil (1.36%), which were among the most traded.

The good performance of Vale, which rose 3.38%, mitigated the losses of the Ibovespa, as well as increases in IRB Brasil (2.25%) and PetroRio (3.06%). The three posted the biggest gains of the session.

With Reuters