By: Leonel Mattos, Market Intelligence Analyst • BRAZIL PRS
USDBRL and Dollar Index (points)
USDBRL variations | Daily: -0.73% | Weekly: +0.04% | Monthly: +0.07% | Annual: -5.62% | Last 12 months: -4.35%
Dollar index variations | Daily: +0.00% | Weekly: -0.48% | Monthly: -0.34% | Annual: +2.58% | Last 12 months: +3.81%
US historical and expected interest rates – updated on July 3, 2026
The currency market is expected to react to the release of the minutes from the last interest rate decision by the Federal Open Market Committee (FOMC) of the Federal Reserve (Fed), which surprised investors due to the number of Committee members anticipating further rate hikes in 2026 and Kevin Warsh's firm stance in defending price stability.
Why this matters: The document may reinforce the perception of the Fed's concerns about inflation above the target, suggesting a readiness to maintain higher interest rates to restore price stability.
Holding back: Although the publication of minutes occurs only three weeks after the FOMC decision, this week's document gains importance as it may offer clues about the trajectory of U.S. interest rates that the new Fed Chair, Warsh, refuses to provide.
Warsh's puzzle: Last week, during participation in a major European Central Bank event, Warsh continued to refuse to provide any kind of future expectations (“forward guidance”) or comment on the economic situation.
Payroll surprises in June: Last week, the Employment Situation Report surprised investors by showing much weaker-than-expected figures for the labor market.
Rate hike in doubt: These data raised doubts about the actual degree of heating in the US labor market, although more data are needed to establish whether there is indeed a trend change.
Expected impact on the BRL exchange rate: bearish
IPCA accumulated over 12 months - selected groups (%)
In the domestic agenda, the release of June's Broad Consumer Price Index (IPCA) should help investors calibrate expectations for inflationary and monetary policy trajectories.
Why this matters: Signs of persistent inflationary pressures should increase bets on halting the interest rate cut cycle by the Monetary Policy Committee (Copom).
Inflation concerns: Inflation concerns raise doubts about the continuity of the Selic rate cut cycle, especially after the IPCA exceeded tolerance bands in the last reading.
Recent data: In the latest edition of the Focus Bulletin, the median projections pointed to a reading of 0.32% in June, which would be a slowdown from 0.58% recorded in the previous period.
Expected impact on the BRL exchange rate: bullish
Last week, the BRL exchange rate was again pressured by perceptions of political risks for Brazilian assets due to investors' sensitivity to the presidential race.
Why this matters: If Flávio's participation negatively impacts investors' perception of his chances of victory, it could increase political risk perceptions for national assets and weaken the real.
Fiscal concerns: In recent months, investors have already reacted negatively to news related to the electoral cycle, such as after the definition of pre-candidates Luiz Inácio Lula da Silva and Flávio Bolsonaro for the presidency.
Worsening risk perception: Last week, the release of voter intention polls showing an increase in President Lula's lead over Flávio worsened investor risk perceptions for national assets.
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