FX Weekly Overview (Brazil Issue)

The dollar is expected to reflect Jackson Hole and the FOMC minutes

The week in review

• The American Consumer Price Index (CPI) for July rose in line with analysts' estimates, with no signs of widespread pressure from tariffs.
• The U.S. Producer Price Index (PPI) for July rose more than expected, raising concerns about a possible pick up in U.S. inflation in the coming months.
• The Brazilian Broad National Consumer Price Index (IPCA) rose less than expected in July, but the increase in service prices still indicated more persistent inflation.
• The Lula government announced a plan of measures to ease the impact of 50% import tariffs on some Brazilian products, with limited effects on the currency market.
• US retail sales in July grew in line with analysts' estimates, showing that demand in the country remains resilient.

USDBRL and Dollar Index (points)

Variations of the USDBRL | Daily: -0.34% | Weekly: -0.65% | Monthly: -3.60% | YTD: -12.60% | In 12 months: -1.55% |
Dollar index variations | Daily: -0.35% | Weekly: -0.43% | Monthly: -2.21% | YTD: -9.51% | In 12 months: -4.98% |
 

KEY EVENT: Powell's speech at Jackson Hole
Expected impact on USDBRL: bearish

USA: History and expectation for the interest rate - updated on August 15, 2025

This week, the important Jackson Hole Annual Monetary Policy Symposium, organized by the Federal Reserve of Kansas City, takes place from Thursday (21) to Saturday (23).

• The event will feature lectures from various central bank authorities from around the world, and investors should closely follow the speech by Federal Reserve Chairman Jerome Powell on Friday (22).

 

Why this is important: Investors are betting that Powell will signal that the Federal Reserve should resume cutting interest rates starting from the September 17 decision, which reduces the expected yield on the country’s bonds, makes it harder to attract foreign investment, and contributes to a global weakening of the dollar.

 

Overview: In previous years, Powell's speech at Jackson Hole provided important information about the conduct of U.S. monetary policy and influenced investors' expectations regarding the country's interest rate trajectory.

• In the July 30 decision, Powell stated that "conditions in the labor market are roughly balanced and consistent with maximum employment," and that "[inflation] is further from the target than [employment] (...)." This means that [monetary] policy needs to be restrictive.
• However, investors began to bet on rapid interest rate cuts by the Fed after the Employment Situation Report on August 1 showed a lower-than-expected net job creation for July and significantly reduced the figures for May and June after revision.
• Meanwhile, inflation data in the United States remains moderate and shows no signs of widespread pressure from import tariffs, which has partially eased investors' fears about the possibility of an inflationary pick up.
• In addition, the Federal Reserve has come under frequent criticism from the White House for keeping its interest rates stable.
• That is why investors are betting that Powell should suggest that the balance of risks has shifted, with lower risks of an inflationary pick up and higher risks of a weakening labor market, justifying a resumption of the interest rate cut cycle by the Federal Reserve.

 

FOMC Minutes: On this same topic, investors should follow the release of the minutes from the July 30 decision of the Federal Reserve's Federal Open Market Committee (FOMC).

• In it, the Committee decided by 9 votes to 2 to keep its interest rate unchanged, in the range between 4.25% and 4.50% p.a.

• The document does not have much influence on financial markets because it is released 21 days after the decisions, which leaves it outdated.
• Still, investors should note what arguments the Committee has analyzed that would justify a rate cut, even though most have decided not to do so.

 

INDICATORS