02/21/2024 – 9:51
The dollar shows a downward bias against the real on the morning of this Wednesday, 21st. The exchange market operates with narrow oscillations and close to stability in the first trades, given the moderate adjustments of the Treasuries curve, which displays a negative bias, and the DXY dollar index against six rival currencies, which points to a slight increase amid some caution before the publication of the minutes of the January Federal Reserve monetary meeting (4 p.m.).
The market expects the document from the American Central Bank to reinforce the chance of interest cuts starting only in June, at a gradual pace. Both the consumer price index (CPI) and the producer price index (PPI) for January came in higher than expected, erasing the possibility of easing starting in March and reducing the chances for May. The CME Group previously pointed to 93.5% of Fed Funds maintenance in March in the range of 5.25% and 5.50%; 64.3% for maintenance in May; 79.2% chance of cuts in June.
The investor has his eye on the president of the Central Bank, Roberto Campos Neto. He said this Wednesday that there is a lack of elements for the monetary authority to understand the speed of the last stage of the services disinflation process, the so-called “last mile”. “We do not have the components to understand whether the last mile of disinflation in services will occur linearly or with moments of slower convergence”, commented Campos Neto during his participation in the breakfast of the Parliamentary Front for the Green Economy, in Brasília.
The BC president pointed out that services inflation, although in the process of convergence, has been running in Brazil slightly above the target, with the latest indices marginally worse. According to Campos Neto, the big debate today is about which factors and risks will be observed in the disinflation process from now on. If the process is reversed, he warned, the world will have to live with higher interest rates for longer. Energy and food prices, which had been contributing to global disinflation, are no longer falling at the same speed, he said. At the same time, in the United States, the process as a whole is disinflationary, but the latest indices surprised with higher-than-expected inflation readings.
The American currency also gives up a little against several emerging currencies abroad, which benefit from new resources announced by the Beijing government for the struggling Chinese real estate sector. The Chinese Ministry of Housing has approved 160 billion yuan ($22.25 billion) in loans for real estate projects, according to Maybank's head of research, Sonija Li.
On the other hand, the fall in commodities hinders the relief in the exchange rate. The most traded iron ore contract for May on the Dalian futures market in China fell 3.98% this Wednesday. The price of oil fell close to 0.30% at around 9:44 am.
On the domestic side, the market will keep an eye on conversations surrounding the repayment of payrolls in 17 sectors of the economy. President Lula and Finance Minister Fernando Haddad meet to discuss the matter. The Minister of Institutional Relations, Alexandre Padilha, said on Tuesday that the government is open to negotiating. The reinstatement is part of Finance Minister Fernando Haddad's plan to increase government revenue and bring public accounts up to date.
At 9:44 am, the spot dollar fell 0.06%, to R$4.9285. The adjustment extends losses recorded in the last four sessions. The dollar futures for March had an upward bias of 0.05%, at R$4.9310.
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