Key points
The Brazilian real (BRL) strengthened to 5.56 per USD, rebounding from its lowest level since December 2021 of 5.67. This recovery was bolstered by the weakness in the US dollar hit by rising expectations of a more accommodative monetary policy stance by the US Federal Reserve.
Picture: The US dollar losing strength against the Brazilian real, as observed on the VT Markets app.
The US dollar faced pressure following disappointing June labor market data, including a missed ADP employment report and an increase in continuing unemployment claims to a two-year high.
Additionally, the services sector experienced its sharpest contraction in four years, and inflation showed signs of deceleration. These factors contributed to speculation that the Federal Reserve might adopt a looser monetary policy.
The Federal Open Market Committee (FOMC) minutes suggested the potential for easing interest rates, which further fueled this expectation.
Related article: Interest rate tug-of-war for central banks: Hawkish vs dovish
Despite the positive movement in the Brazilian real, ongoing concerns about the fiscal management of the country and the autonomy of central bank continue to weigh on the currency.
President Lula Da Silva recently questioned the relevance of the current high interest rates, contrasting with the defense of Campos Neto from the Central Bank of Brazil regarding its role in controlling inflation. Campos Neto also cautioned against fiscal adjustments that could hinder growth and exacerbate inflation pressures.
The interplay between US economic data and Brazilian fiscal policies presents both opportunities and risks for traders. The potential for a more accommodative Fed policy could support further gains for the BRL. However, domestic political and economic uncertainties in Brazil might limit the extent of this appreciation.
In the short term, the BRL may continue to find support if the Fed signals a more dovish stance. However, traders should remain discipline in risk management as domestic factors could undermine confidence in the fiscal and monetary stability of Brazil.
Education
Company
FAQ
Promotion
Risk Warning: Trading CFDs carries a high level of risk and may not be suitable for all investors. Leverage in CFD trading can magnify gains and losses, potentially exceeding your original capital. It’s crucial to fully understand and acknowledge the associated risks before trading CFDs. Consider your financial situation, investment goals, and risk tolerance before making trading decisions. Past performance is not indicative of future results. Refer to our legal documents for a comprehensive understanding of CFD trading risks.
The information on this website is general and doesn’t account for your individual goals, financial situation, or needs. VT Markets cannot be held liable for the relevance, accuracy, timeliness, or completeness of any website information.
Our services and information on this website are not provided to residents of certain countries, including the United States, Singapore, Russia, and jurisdictions listed on the FATF and global sanctions lists. They are not intended for distribution or use in any location where such distribution or use would contravene local law or regulation.
VT Markets is a brand name with multiple entities authorised and registered in various jurisdictions.
· VT Global Pty Ltd is authorised and regulated by the Australian Securities & Investments Commission (ASIC) under licence number 516246.
· VT Global is not an issuer or market maker of derivatives and is only allowed to provide services to wholesale clients.
· VT Markets (Pty) Ltd is an authorised Financial Service Provider (FSP) registered and regulated by the Financial Sector Conduct Authority (FSCA) of South Africa under license number 50865.
· VT Markets Limited is an investment dealer authorised and regulated by the Mauritius Financial Services Commission (FSC) under license number GB23202269.
· VTMarkets Ltd, registered in the Republic of Cyprus with registration number HE436466 and registered address at Archbishop Makarios III, 160, Floor 1, 3026, Limassol, Cyprus.
Copyright © 2024 VT Markets.