Dollar drops as market cautious awaits US jobs report

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O dollar fell 0.38%, quoted at R$ 5,218, around 9:10 am this Friday (2), with cautious investors waiting for the Payroll report of employment in the United States which may indicate the pace of the cycle of interest rate hikes in the country.

If the monthly data indicate a still buoyant labor market, the argument that the Federal Reserve will need to raise interest rates further to contain demand and inflation gains strength, a beneficial scenario for the US currency. A weak market, on the other hand, helps bets on a milder cycle, to avoid excessively slowing the economy.

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The market has had a worsening of sentiment since last Friday (26), after the speech of the Fed chairman, Jerome Powell have one tougher tone in the fight against inflation than expected, reinforcing bets on a higher interest rate hike in September and a recession in the country.

The external bad mood also worsened after the release of industrial data from China that indicated a deepening of the country’s economic slowdown, which tends to harm exporters of commodities from the perspective of lower demand.

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In addition, record inflation in the euro zone in August gave strength to bets on more aggressive interest rate hikes in the region, a bad scenario for the world economy.

On Thursday (1st), the dollar rose 0.73%, to R$5.238. already the Ibovespa ended with an advance of 0.81%, at 110,405.30 points.

overall feeling

The global risk aversion of investors, triggered by fears about a possible generalized economic slowdown due to a series of interest rate hikes around the world to contain record levels of inflation, has varied in intensity depending on expectations about the interest rate hike cycle in the United States. United.

The process of raising the US rate continued in July with a new increase of 0.75 percentage point. However, the Federal Reserve has signaled that it could make smaller hikes as the country’s economy already shows signs of slowing, seeking to avoid a recession.

Higher interest rates in the United States attract investments for the country’s fixed income due to its high security and favor the dollar, but harm markets and stock exchanges around the world, including the North American ones.

Investors are also monitoring the situation of China’s economy, which also shows signs of a slowdown linked to a series of lockdowns in relevant cities. The expectation is that the Chinese government will intensify an effort to stimulate the economy, while facing difficulties to reverse a situation of low consumption by the population, which impacts the country’s demand for commodities.

Even so, the Ibovespa and the real found room for recovery with an improvement in the mood of the market, supported by the positive outlook for commodities, a stronger domestic economic scenario and a reduction in the perception of risks in relation to the elections. The scenario, however, may change depending on the degree of risk aversion abroad.

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*With information from Reuters

Source: CNN Brasil

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