Dollar opens lower, with expectation of interest rate decision in Brazil and the USA

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The previous day, the North American currency advanced 0.59%, quoted at R$4.9659. The main stock index of the Brazilian stock exchange fell 0.40%, to 126,403 points. Copom should reduce the Selic, the basic interest rate, this Super Wednesday. Freepik The dollar opened lower this Wednesday (13), a day marked by investors’ expectations regarding the direction of interest rates in Brazil and the United States. Here, the Monetary Policy Committee (Copom) of the Central Bank (BC) defines the new Selic, the basic interest rate, currently at 12.25% per year. The expectation is that there will be a new cut of 0.5 percentage points, taking the rate to 11.75% per year, the lowest level in almost two years. In the United States, the market consensus is that the Federal Reserve (Fed, the American central bank) should keep its interest rates unchanged between 5.25% and 5.50% per year. See the day in the markets below. Understand what makes the dollar rise or fall Dollar At 9:10 am, the dollar fell 0.17%, quoted at R$4.9575. See more quotes. The previous day, the North American currency closed up 0.59%, sold at R$4.9659. With the result, it started to accumulate: increase of 0.74% in the week; advance of 1.03% in the month; decline of 5.91% in the year. Ibovespa Ibovespa only starts operating at 10am. The previous day, the index closed down 0.40%, at 126,403 points. As a result, it began to accumulate: drop of 0.54% in the week; decrease of 0.73% in the month; gains of 15.19% in the year. READ ALSO CASH OR CARD? What is the best way to take dollars when traveling? DOLLAR: When is the best time to buy the currency? What’s moving the markets? In the domestic scenario, the outlook is quite optimistic for the future of the Selic rate. This is because decisions about interest rates are made based on the trajectory of inflation. Simply put, if inflation is under pressure and rising, the Copom raises interest rates to contain the rise in prices. When inflation slows down, it becomes possible for interest rates to fall as well. Currently, Brazilian inflation, measured by the Broad Consumer Price Index (IPCA) shows a benign trajectory. Yesterday, the Brazilian Institute of Geography and Statistics (IBGE) announced that prices measured by the IPCA rose 0.28% in November, compared to an increase of 0.24% in the previous month. In the last 12 months, inflation is 4.68% and, in the year, it has accumulated an increase of 4.04%. In both intervals, inflation is within the BC’s target for 2023 – 3.25%, and may range between 1.75% and 4.75%. In analysis, XP Investimentos considered that, since the last Copom meeting, at the beginning of November, the news was benign for short-term inflation, with a fall in interest rates in developed countries, with a decline in inflation and oil prices. Petroleum. “The main risk, in our view, remains on the fiscal side. Recent news suggests new expenditures outside the limits of the recently approved framework, and less budget contingency if the fiscal target is at risk of not being achieved. These signs reinforce our view of that fiscal policy has an expansionist bias, which tends, at some point, to put pressure on inflation expectations”, said the institution in a statement. In this context, like most of the market, XP’s expectation is that the Copom will choose to promote a new cut of 0.5 percentage points in the Selic rate, in what would be the fourth consecutive drop. “The next two cuts of 0.5% are taken for granted in the next two meetings and in 2024 we will be able to see some demonstrations regarding the acceleration in cuts. Until then, the discussion will be how far this interest rate cut can go”, comments Caio Canez de Castro, capital markets specialist and partner at GT Capital. Still on the domestic scene, President Lula sanctioned the law that taxes exclusive and offshore funds. The bill that establishes rules for the sports betting market was approved by the Senate. Both proposals aim to increase federal revenue. Returning to interest rates, in the United States the big highlight of the day is also interest rates. There, the situation is a little different from what Brazil experiences today. November inflation, also released yesterday, rose 0.1% in the world’s largest economy, while projections were for price stability. Annual inflation fell from 3.2% to 3.1%, while the Fed’s target is 2%. In this context, what analysts and investors expect is interest rates remaining between 5.25% and 5.50% per year at this and future meetings. The expectation is that the Fed will only begin a cycle of rate cuts in mid-2024.

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