Ibovespa operates close to stability after Copom and with PEC in focus; dollar advances

The Ibovespa operated in stability in the first trades this Thursday (08), despite the advance of future shares in the United States, after the approval of the Transition PEC in the Senate and messages from the Central Bank to the government elected the day before, in a decision that left the country’s interest rate unchanged.

The BC said that there is high uncertainty about the future of Brazil’s fiscal framework and stressed that it will closely monitor the public accounts framework.

At 10:45 am (Brasília time), the Ibovespa fell 0.05%, to 109,017.96 points. Vale and companies linked to metallic commodities, such as steelmakers, advanced, which helped to limit losses in this early trading session.

Dollar

The dollar advanced against the real in the midst of unstable negotiations, with investors adjusting positions after recent losses in the currency, following the progress of the Transition PEC and digesting the Central Bank’s monetary policy statement, which brought fiscal warnings to the elected government.

At the same time, the dollar in sight rose 0.14%, to R$ 5.213 in the sale. The currency showed some instability in the pace of gains, and earlier rose 0.90%, to R$ 5.253.

On B3, the first-maturity dollar futures contract rose 0.19%, to R$ 5.242.

According to Fernando Bergallo, director of operations at FB Capital, part of the dollar gains this morning seems to be related to an adjustment after recent falls. The US currency in sight retreated around 1.5% in the accumulated of the last two sessions.

He also cited some investor discomfort with the domestic scenario, after the Senate approved on Wednesday in two rounds and by a wide margin of votes the Transition PEC, which expands the spending ceiling by 145 billion reais for two years to the payment of Bolsa Familia of R$ 600.

The text, which is now going to the Chamber, was reduced in relation to the elected government’s initial proposal, but still contains a value seen by market participants as exaggerated and probably harmful to the country’s fiscal credibility.

The Central Bank’s warning issued in its monetary policy communiqué the day before, when the autarchy said that there is high uncertainty about the future of the country’s fiscal framework, and stressed that it will closely monitor the public accounts framework, contributed to the cautious climate.

“The impact of the expansion of proposed expenses in the PEC still in process may result in more persistent inflation and above the target for a longer time, preventing the beginning of monetary easing in the coming months”, said in a report Rafaela Vitoria, chief economist at Banco Inter , in response to the Monetary Policy Committee (Copom) decision.

“The absence of a proposal for a new fiscal framework leaves more uncertainty in the scenario and may discourage inflation expectations in the medium and long term. The BC should proceed with caution in the current scenario, and its autonomy may mean that the response to a more expansionary fiscal policy implies greater monetary restrictions to counteract it.”

In its last meeting, the BC maintained the Selic rate at the current level of 13.75%. Although high interest rates are seen as a possible support factor for the real, they also tend to constrain the country’s economic growth, a factor that is taken into account for investment decisions by foreign agents, as well as the level of anchoring of inflation expectations.

The day before, the US currency traded on the interbank market closed down 1.23%, at R$5.206, the lowest closing level since last Thursday (R$5.197).

Source: CNN Brasil

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