The dollar has been gaining strength in recent weeks, thanks to concerns surrounding interest rates in the United States. Just over a month ago, the Brazilian stock market hit its lowest level ever, with the major stock index, Ibovespa, finishing at 128,524 points, down 0.60% from the previous trading session. At that time, the North American currency was valued at R after a 0.09% increase.
In the current session, there is still uncertainty surrounding the trajectory of interest rates in the United States. However, the dollar is reversing its signal and functioning higher as of today, Thursday (18). The Federal Reserve (Fed), the American central bank, is expected to deliver a speech later in the day, and this is contributing to the market’s uncertainty.
Despite the weak economic agenda both in Brazil and internationally, investors are closely analyzing the weekly statistics on unemployment insurance in the United States. The labor market in the world’s biggest economy is showing signs of strength, which could impact the decisions regarding interest rates.
In Brazil, the Ibovespa, the major stock index on the B3 market, is currently trading at a low. As of 11:10 am, the dollar has experienced a 0.12% increase in value. On a weekly basis, the dollar has improved by 1.50%, while on a monthly and annual basis, it has seen improvements of 1.59%.
Simultaneously, the Ibovespa has dropped 0.03%, reaching 128,483 points. The previous day saw a decline of 0.60%, bringing the index down to 128,524 points, its lowest position in almost a month. Over the past week, the Ibovespa has experienced a drop of 1.88%, and over the past month and year, it has seen drops of 4.22%.
As investors await fresh figures and speeches with a less robust economic agenda, global markets remain relatively stable. Attention is focused on the Federal Reserve in the United States, as investors closely follow the speeches of its officials. Today, many are anticipating the speech of Raphael Bostic, president of the Atlanta Fed.
Recent discussions among international leaders regarding the possibility of a cut to interest rates in the United States have been more circumspect. Christopher Waller, the chairman of the Federal Reserve, has emphasized the importance of maintaining low inflation before taking any action to lower the benchmark interest rate.
While the United States is nearing its inflation goal of 2%, some investors are still betting on the North American central bank to begin cutting lending charges in March and potentially cut rates by 1.5 percentage points by the end of the year. However, these expectations are starting to shift.
According to the CME Group’s FedWatch tool, 61% of investors now believe that the Federal Reserve will begin reducing interest rates in March. By the end of 2023, this figure has risen to 80%.
The Federal Reserve has maintained a base rate between 5.25% and 5.5% since July. The market is eagerly observing any indications of potential rate cuts in the future, as this could have significant implications for both the dollar and the Ibovespa.