Follow the dollar rate and the Stock Exchange – 12/22/2023 – Market

The dollar is falling at the beginning of trading this Friday (22). At around 9:32 am, the American currency fell 0.16%, to R$4.8785.

Investors are waiting for the PCE (American personal consumption inflation), the price index most closely monitored by the Fed (US central bank). The expectation is that the index will slow down from 3% in October to 2.8% in November. The Fed’s target for inflation is 2%. The further away from the target, the less likely it is that the authority will cut interest rates in the first half of 2024.

Yesterday the dollar closed down 0.49%, at R$4.8868, after data from the largest economy in the world reinforced investors’ bets on a fall in rates in March, even with monetary authorities signaling that the rate will be eased. should come later.

On Thursday, investors reflected on the US unemployment benefit and GDP (Gross Domestic Product) data for the third quarter and what they could imply for American monetary policy.

The number of Americans filing new unemployment claims rose slightly (2,000) last week to 205,000, suggesting underlying strength in the economy as the year ends. Economists consulted by Reuters predicted 215,000 requests.

While the claims data is volatile this time of year because of the holidays, it remains consistent with a reasonably healthy job market, which should keep the economy out of a recession next year. On the negative side, they can generate inflation and stop the expected cycle of cuts in American interest rates.

In the final reading of American GDP for the third quarter, the government confirmed that economic growth accelerated to an annualized rate of 4.9%, in a figure revised downwards in relation to the previously reported rate of 5.2%. Economists had expected no revision, but this was still the fastest pace of expansion since the fourth quarter of 2021.

The economy, which grew 2.1% in the second quarter, has been expanding at a pace well above what Fed officials view as the non-inflationary growth rate of about 1.8%. However, momentum appears to have faded in the final three months of the year as consumer spending slows. For the fourth quarter, growth estimates range from 1.1% to 2.7%.

“This slightly weaker than estimated level of activity renewed investors’ bets on the conduct of American monetary policy being a little less tight,” says Carla Argenta, chief economist at CM Capital.

The vast majority of the market (71.3%, according to the CME platform) is betting that American interest rates will be reduced by 0.25 percentage points in May. Yesterday, this percentage was 69.3%.

“All of this corroborates the view that the Fed could lower interest rates faster and even more times next year, and this ended up weakening the dollar in the session”, says Victor Beyruti, economist at Guide Investimentos