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Currencies Market Intelligence Brazil
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DAILY REPORT Foreign Exchange | ||
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July 29, 2020
Vitor Andrioli Translated from its Rodolfo Abachi |
USDBRL opens lower USD tumbles to near 2-year lows abroad,
The USDBRL showed a depreciation of 0.4%, quoted at BRL 5.135, while awaiting Fed’s monetary policy decision and monitoring the USD performance in the foreign markets. The expectations that the US monetary authority will maintain the exchange rate’s target near zero and reinforce the importance of a more expansionary monetary policy could pressure yields on Treasuries and reduce the demand for USD compared to its pairs.
The dollar index posted new 2-year lows this morning, down by 0.2% to trade near 93.45 points. The stocks rally and the perspective that Fed’s monetary policy will not undergo significant changes were the main factors weighing on the USD against a basket of other advanced currencies this Wednesday.
Despite not expecting significant changes, the market should be attentive to goals of price stability and how flexible the Fed will be towards inflation during the economic rebound process, since higher inflation would reduce the yields on Treasures, affecting its attractiveness and the demand for the USD.
Attention should also turn to the US Congress’ trillionaire stimulus negotiations. Investors expect more stimulus to be injected in the country’s economy and regions most affected by recent COVID-19 outbreaks, in addition to the extension of supplemental benefits for the unemployed. If Congress does not pass this bill before the annual August recess or vote on a less robust package, the frustration of expectations could affect the market’s trajectory. |
ECONOMIC INDICATORS
Sources: Central Bank of Brazil, B3, IBGE, Fipe, FGV, MDIC, IPEA, J.P. Morgan and CommodityNetwork Trader’s Pro.
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A U.S. midterm clean sweep is seen as a near-term risk for the dollar if it raises the odds of political gridlock. Strong U.S. data and a Federal Reserve still leaning toward tighter policy give the greenback a sturdier floor underneath.
Once the Reserve Bank of Australia has spoken, AUD/USD event risk moves to U.S. data. Nonfarm payrolls carry the largest potential impact on U.S. monetary policy and on the dollar side of the pair.
The Australian dollar lost ground across the major currencies after a split RBA board removed its explicit pledge to keep tightening. Softer domestic data and the risk of a broader risk-off tone add pressure from both sides.
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