09/05/2024 – 11:37
The dollar fell against the real on Thursday, the 5th, in line with the weakness of the US currency abroad, as investors assessed data from the United States labor market that encouraged the prospect of more aggressive monetary easing by the Federal Reserve.
+ Market increases chances of a bigger Fed rate cut after US employment data
At 9:54 a.m., the spot dollar fell 0.33% to R$5.6211 for sale. On B3, the first-maturity dollar futures contract fell 0.38% to R$5.638 for sale.
On Wednesday, the dollar closed slightly down 0.08%, quoted at R$5.6395.
Global markets were digesting new U.S. labor market data this morning for clues about the state of the world’s largest economy and the size of a potential rate cut the Fed could make at its meeting later this month.
In the first release of the day, ADP’s employment report showed 99,000 private sector jobs were created in August, well below the expectation of analysts polled by Reuters for 145,000, up from a downwardly revised 111,000 the previous month. It had previously reported 122,000 jobs added in July.
Minutes later, Labor Department figures showed initial jobless claims for the week ended Aug. 31 fell to 227,000, below analysts’ projection of 230,000 from a slightly upwardly revised 232,000 the previous week.
Despite the more benign data for unemployment benefit claims, the private sector report reinforced some financial agents’ fears about an aggressive slowdown in the North American economy, with a stronger-than-expected cooling of the labor market, which should be considered by the Fed in its next decision.
Last month, Fed Chair Jerome Powell said “the time has come” to adjust the U.S. central bank’s stance, noting that officials would not accept a further softening of the labor market.
Traders had put a 45% chance of a 50 basis point Fed rate cut this month, up from 43% before the data. They still forecast 112 basis points of easing by the end of the year, up from 109 basis points earlier.
As a result, the dollar weakened against most of its strong and emerging peers, due to the sharp drop in Treasury yields, which made the US currency less attractive to investors.
The 10-year Treasury yield – a global benchmark for investment decisions – fell 4 basis points to 3.731%.
“If you have a perspective that the North American economy is contracting, you have the vision of interest rate cuts there and here maintaining the interest rate difference with the US, the tendency is for our currency to appreciate against the dollar,” said Vitor Oliveira, partner at One Investimentos.
The dollar index — which measures the performance of the US currency against a basket of six currencies — fell 0.18% to 101.080.
Among emerging markets, the US currency fell against the Colombian peso, the South African rand and the Chilean peso.
Attention now turns to the U.S. Labor Department’s August employment report, which is expected to add 160,000 jobs, up from 114,000 the previous month.
“Second-line US labor market data so far shows an undeniable easing condition, and there is no way the dollar will not suffer from this. Another weak number tomorrow could confirm a larger Fed cut in September and cement the dollar’s downward path,” said Eduardo Moutinho, markets analyst at Ebury Bank.
On the national scene, the market was still evaluating the prospect of an increase in the Selic rate, now at 10.50% per year, at this month’s Copom meeting, after a higher-than-expected GDP for the second quarter of the year and recent readings that showed inflation moving away from the center of the 3% target.
On the Brazilian interest rate curve, the prospect of more aggressive monetary easing in the US was pushing down future interest rates, with the DI rate for January 2025 — which reflects monetary policy in the very short term — at 10.925%, a drop of 2 basis points.
Ibovespa
The São Paulo stock exchange did not show a clear bias on Thursday, with agents reacting to weaker-than-expected US employment data, while awaiting a labor market report on Friday considered crucial for bets on the Federal Reserve’s next decision.
At around 10:40 am, the Ibovespa, the benchmark for the Brazilian stock market, rose 0.22% to 136,414.42 points, having reached 135,959.32 points at its lowest point and 136,529.02 points at its highest point so far. The financial volume totaled 1.98 billion reais.
Data released earlier by ADP showed that 99,000 jobs were created in the US private sector in August, the lowest number since January 2021, compared with 111,000 in July (revised from 122,000 previously released) and an expected 145,000 positions.
Initial jobless claims also fell short of economists’ forecasts, falling 5,000 in the week ended Aug. 31 to a seasonally adjusted 227,000, compared with estimates of 230,000.
After the data, the yield on the 10-year U.S. Treasury note was at 4.0392%, from 4.067% a day earlier, while the S&P 500 was up 0.06%.
Investors now await the government’s broad labor market report, which could help determine bets on whether the Federal Reserve will cut rates by a quarter or half percentage point this month. The rate is currently in a range of 5.25% to 5.50%.
According to Avenue’s chief strategist, William Castro Alves, with yet another weak labor market figure released by ADP, expectations for a 0.5 point cut in the decision to be announced on the 18th have increased. “Attention now turns to the payroll figure… tomorrow.”
HIGHLIGHTS
– MRV&CO ON advanced 4.76%, in another session of relief in future interest rates, with the real estate sector index showing an increase of 0.33%.
– AZUL PN fell 1.63%. The airline announced late Wednesday that BlackRock, on behalf of some of its clients, sold shares in Azul and its holdings now represent approximately 4.716% of the company’s total preferred shares.
– BRAVA ENERGIA ON fell 1.26%, after the oil company, formerly known as 3R, announced that production at the Papa Terra field was interrupted on Wednesday at the request of the National Agency of Petroleum, Natural Gas and Biofuels (ANP) for information on the platform’s operating systems.
– VALE ON was up 0.72%, even as iron ore futures in China fell for the fifth straight session. The most-traded contract on the Dalian Commodity Exchange ended the day down 2.58% at 678.5 yuan ($95.58) a tonne.
– PETROBRAS PN rose 0.34%, on a day of rising oil prices on the international market. The barrel of Brent, used as a reference by the company, rose 1.06%, to 73.47 dollars.
– ITAÚ UNIBANCO PN recorded a decrease of 0.21%, while BRADESCO PN showed stability. BANCO DO BRASIL ON lost 0.31% and SANTANDER BRASIL UNIT fell 0.47%.
– ALLOS ON fell 0.26%, after announcing the second expansion of Shopping Campo Grande the day before, with an investment of 216 million reais. The project, according to the company, will impact 23.7 thousand m² of Gross Leasable Area (GLA), including 11.5 thousand m² of redeveloped GLA and 12.2 thousand m² of additional GLA.
– REDE D’OR ON advanced 0.57%, against the backdrop of a report from the rating agency S&P Global Ratings raising the healthcare group’s rating to “BB+” from “BB”.
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