By: Vitor Andrioli, Market Intelligence Manager - Brazil
USDBRL and Dollar Index (points)
USDBRL Variations
Daily: +0.09% | Weekly: +0.13% | Monthly: -1.89% | Annual: -13.02% | Last 12 months: -11.26%
Dollar Index Variations
Daily: +0.07% | Weekly: +0.27% | Monthly: +1.09% | Annual: -8.08% | Last 12 months: -8.77%
In the upcoming week, the market will closely monitor U.S. economic indicators, which are still normalizing after last year’s government shutdown.
Why It Matters: A stronger economy coupled with elevated inflation signals to the Fed that interest rates could remain higher for longer despite Trump’s calls for rate cuts.
Interest Rate Outlook: Expectations for the Federal Open Market Committee (FOMC) meeting on January 27–28 are for rates to remain steady in the 3.5%–3.75% range, reflecting a more cautious Fed approach.
Expected Impact on USDBRL: Bullish
With a light domestic agenda, the National Consumer Price Index 15 (IPCA-15) will be Brazil’s most relevant indicator next week, helping investors refine expectations for the Central Bank’s interest rate-cutting cycle.
Why It Matters: Price indices are critical in determining interest rates. Persistent prices within tolerance bands strengthen bets on rate cuts by the Central Bank.
Outlook: December’s inflation data, the National Consumer Price Index (IPCA), showed a 0.33% monthly increase, closing 2025 with 4.26% cumulative inflation, within tolerance bands.
Expected Impact on USDBRL: Bullish
The market will also focus on the Bank of Japan’s (BoJ) interest rate decision on Friday (23). While the BoJ is expected to hold rates at 0.75%, investors will watch for signals regarding future policy shifts.
Why It Matters: Japan plays a key role in global “carry-trade” operations due to its historically low interest rates. Monetary policy decisions in Japan can reshape international “carry-trade” activity, impacting market liquidity.
Outlook: Following its December rate hike to 0.75%, the BoJ is likely to hold rates steady next week. However, Japanese economic officials have advocated for more aggressive rate policies to curb yen depreciation. The BoJ may signal rate hikes for mid-2026, with investors anticipating changes by July–September.
Expected Impact on USDBRL: Uncertain
The U.S. Supreme Court will resume hearings on Wednesday (21) regarding the attempt to dismiss Lisa Cook, a Federal Reserve Board member appointed by former President Joe Biden. This unprecedented move is part of broader Trump administration actions against Fed independence and other federal agencies.
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