Follow the exchange rate of the dollar and the stock market this Friday (9) – 02/09/2024 – Market

The dollar began trading this Friday (9), pre-Carnival, down 0.19%, at R$4.9851, at 9:44 am. The day before, the currency approached R$5 with higher-than-expected inflation in January and a stronger-than-expected American job market.

Investors operate according to expectations of interest rate cuts in Brazil and the United States. Maintaining high interest rates abroad, while the Selic falls here, tends to strengthen the dollar against the real.

On Thursday (8), the dollar closed up 0.53%, at R$4.9945, reflecting the IPCA (Broad National Consumer Price Index) of January. Brazil’s official inflation slowed to 0.42% after reaching 0.56% in December, according to data released by IBGE (Brazilian Institute of Geography and Statistics) this morning.

The expectation of analysts consulted by the Bloomberg agency was for a smaller variation, of 0.34%, in the first month of this year.

“Although the full index and cores in the 12-month period continued to cool down, the annualized and seasonally adjusted core average rose again, and this caused stress on risk assets, causing a fall in the Ibovespa”, says Andre Fernandes, director of variable income and partner at A7 Capital.

According to the analyst, investors’ fear is that the rise in prices for part of the underlying services could lead to a higher than expected IPCA in the coming months.

“In general, inflation remains under control, but there are some warning signs; the composition of the IPCA had a slight qualitative worsening,” said Gustavo Sung, chief economist at Suno Research. “For monetary policy, this data should not change the flight plan already announced by the Central Bank, of cuts of 0.5 percentage points in the next meetings.”

January’s IPCA reinforces the prospect of maintaining the pace of monetary easing by the BC, with no room for accelerating cuts, which could work in favor of the real, since, in this way, the Selic will remain at a restrictive level for a long time. .

High interest rates in Brazil restrict the performance of the variable income market, weighing on companies’ debt and credit costs and attracting investors to fixed income.

Another point of attention for investors is the position of the Fed (US central bank) regarding the beginning of the cycle of cuts in US interest rates.

On Thursday, the US government reported that initial claims for state unemployment benefits fell by 9,000 in the week ending February 3, to a seasonally adjusted 218,000. Economists consulted by Reuters predicted 220,000 applications for the last week.

A stronger labor market reinforces the Fed’s current strategy of delaying the start of interest rate cuts in the US. More people employed can mean an increase in income, which leads to prices rising. Furthermore, it demonstrates the strength of the American economy even with high interest rates.

In reaction, Treasury yields rose again, strengthening the dollar. In the USA, the S&P 500 stock index rose slightly by 0.06%, while the Dow Jones rose by 0.13% and the Nasdaq, by 0.24%.

On Wednesday, Fed authorities reinforced that more data is needed to have certainty about the path of inflation and room for interest cuts.

Recently, after more cautious signals from Fed members, including President Jerome Powell, and stronger than expected US employment data, the market reduced its bet that monetary easing would begin in March. This in turn has strengthened the dollar globally, as the higher the interest rates, the more profitable the country’s currency is.

(With Reuters)