- Bearish Factors
- Fears of political pressures on the Federal Reserve’s monetary policy decisions increase bets on U.S. rate cuts, hampering the country’s ability to attract financial investments and contributing to the global weakening of the dollar.
- Weaker labor market data may increase bets on Fed rate cuts, hampering the attraction of financial investments to the country and contributing to the global weakening of the dollar.
- Bullish Factors
- The clash between the Executive and the Legislature may hinder the government’s fiscal policy conduct and threaten the balance of public finances, which could increase investors’ risk perception of Brazilian assets and harm the real’s performance.
The week in review
The week was marked by the global weakening of the dollar amid a reduction in geopolitical tensions in the Middle East and an increase in bets on interest rate cuts by the Federal Reserve. However, the Brazilian real’s gains were limited by the unexpected annulment by the National Congress of the decrees that raised the IOF, amplifying concerns about the sustainability of public finances in Brazil.
The real’s exchange rate closed this Friday (27) at R$ 5.4831, a weekly decline of 0.8%, monthly of 4.1%, and annual of 11.2%. Meanwhile, the Dollar Index (DXY) closed the week at 97.3 points, a variation of -1.5% for the week, -2.0% for the month, and -10.0% for the year.
USDBRL and Dollar Index (points)
Source: StoneX cmdtyView. Prepared by: StoneX.
KEY EVENT: Global Trend of Dollar Depreciation
Expected Impact on USDBRL: Bearish
U.S.: Historical and Expected Interest Rate – updated on June 27, 2025
Source: CME FedWatch Tool. Prepared by: StoneX. Refers to the most likely bet in the interest rate futures market on the indicated date.
After peaking in early January, the Dollar Index, which measures the value of the U.S. currency against a basket of advanced-economy currencies, has been depreciating persistently, falling more than 11% since then. This significant weakening of the dollar was driven by various factors, such as inconsistency and unpredictability in U.S. economic policy conduct, concerns about the balance of the country’s public finances and the sustainability of its debt accumulation pace, fears of a slowdown in American economic growth, and improvements in the economic outlook of other countries, particularly Europe.
This trend intensified last week following the ceasefire between Israel and Iran, which reduced the perception of geopolitical risks and favored demand for risk assets, and after investors increased their bets on rate cuts by the Federal Reserve, lowering the expected returns on dollar-denominated securities. The rise in bets was partly driven by the release of U.S. economic data, including softer-than-expected inflation readings, a faster-than-expected slowdown in personal consumption, and signs of weakening in the labor market.
However, part of this increase in rate cut bets was due to a Wall Street Journal report last Wednesday (25), which stated that U.S. President Donald Trump is considering prematurely appointing the next Federal Reserve (Fed) Chair with the aim of influencing investors’ expectations regarding U.S. monetary policy after Powell’s term ends in May 2026. Traditionally, U.S. presidents announce their candidate for Fed Chair three to four months before the end of the incumbent’s term. However, the report indicated that Trump wishes to make this appointment by September or October—seven to eight months before incumbent Fed Chair Jerome Powell’s term concludes on May 15. Additionally, Trump has intensified his criticisms of Powell, calling him “horrible,” having “low IQ,” and being “very dumb,” and even suggesting he might fire him—though the legality of such a move is questionable. These developments have raised concerns that the Fed’s independence could be undermined and that the Fed might be led to cut rates earlier and without solid technical justification, undermining the credibility of U.S. monetary policy. This, in turn, has increased risk perception for U.S. assets and bolstered bets that U.S. interest rates will fall at a faster pace, reducing the attractiveness of dollar-denominated securities and weakening the U.S. currency.
Additionally, there are still significant uncertainties related to U.S. tariff policy that could increase risk perception for U.S. assets. First, the temporary reduction of import tariffs for all countries except China ends on July 9, two weeks from now. Furthermore, doubts remain about the possibility of new trade agreements in the short term. Although the White House announced that it has “formalized” the rare earths agreement with China, the terms remain unknown, and relations with Beijing are perceived as distant. Moreover, last Friday (27), Trump announced that all negotiations with Canada are suspended due to a tax on technology services affecting several American companies. On the other hand, Treasury Secretary Scott Bessent said he believes the U.S. can close more than ten trade agreements by September 1.
U.S. Economic Data
Expected Impact on USDBRL: Bearish
Weekly First-time Unemployment Claims in the United States
Source: U.S. Department of Labor (DOL), Federal Reserve Bank of St. Louis. Prepared by: StoneX.
Weekly Continued Unemployment Claims in the United States
Source: U.S. Department of Labor (DOL), Federal Reserve Bank of St. Louis. Prepared by: StoneX.
This week, the release of important U.S. indicators should help investors calibrate their expectations for the country’s interest rate path and influence the global value of the dollar. Notable are labor market data such as the June Employment Situation Report and the May Job Openings and Labor Turnover Survey (JOLTS). Recent trend indicators point to a weakening of labor market conditions. Weekly initial claims have increased slightly, suggesting a small rise in layoffs. Additionally, the total number of people receiving benefits is rising rapidly and reached its highest level since November 2021, suggesting a slowdown in the hiring pace.
The median estimate points to net job growth in June of 129,000, a slight slowdown compared to the 139,000 recorded in May. If confirmed, this estimate suggests that current employment levels remain healthy, but the trend is for gradual and persistent moderation in labor conditions, consistent with a slowdown in the country’s economic activity.
Thus, after three months of more contained inflation, the release of weaker labor market data should reinforce bets on a faster pace of rate cuts by the Federal Reserve, which, in turn, reduces the expected yield on dollar-denominated securities and favors a weakening of the U.S. currency.
Revocation of the IOF Increase by Congress
Expected Impact on USDBRL: Bullish
Next week, the clash between the Executive and the National Congress over the increase in Financial Operations Tax (IOF) rates may keep risk perception regarding Brazilian assets elevated. Institutional tension intensified last week after the approval of Legislative Decree Project (PDL) No. 314/2025, which annulled the federal government’s measure responsible for raising IOF rates. In response, according to reports, President Luiz Inácio Lula da Silva signaled his intention to legally challenge the decision in the Federal Supreme Court (STF), alleging that the Legislature was infringing on the separation of powers. In an interview last Friday (27), Finance Minister Fernando Haddad argued that the Legislature was exceeding its limits by interfering in an instrument that falls under Union competence, while the Constitution grants the federal government the right to levy taxes on “credit, exchange, and insurance operations, or related to securities.”
On the other hand, if the annulment of the IOF increase prevails, the Executive may be forced to make new budget cuts in 2025. Estimates by the economic team indicate that revoking the decree will result in a revenue loss of around R$ 10 billion this year. According to the Finance Ministry, this amount would be significant in the government’s effort to meet the fiscal target. At the same time, the Chamber of Deputies is expected to schedule an urgency request next week for voting on the complementary bill that proposes cuts to tax benefits. The urgency request is already being coordinated by the Chamber and is expected to be advanced to mitigate the backlash caused by the rejection of the IOF increase and demonstrate Congress’s commitment to fiscal adjustment. If approved, this measure could represent, according to the government, an increase of R$ 20 billion in revenue in 2026, helping to restore the fiscal margin compromised by the recent defeat of the federal government. In any case, the still uncertain scenario and the deadlock between the Executive and the Legislature are likely to continue generating unease among investors, which tends to increase perceived risk in Brazilian assets and may put pressure on the real.
End-of-Month Ptax Rate
Expected Impact on USDBRL: Undefined
The USDBRL is expected to show higher trading volume and volatility on Monday (30), within the time windows used by the Central Bank to calculate the end-of-month Ptax rate, which is a reference rate published daily by the Central Bank and its end-of-month value is widely used in currency and derivatives contracts. Thus, market operators intensify their operations during these intervals, competing to define it.
INDICATORS
Sources: Central Bank of Brazil; B3; IBGE; Fipe; FGV; MDIC; IPEA; and StoneX cmdtyView.
The StoneX Group Inc. group of companies provides financial services worldwide through its subsidiaries, including physical commodities, securities, exchange-traded and over-the-counter derivatives, risk management, global payments and foreign exchange products in accordance with applicable law in the jurisdictions where services are provided. References to over-the-counter (“OTC”) products or swaps are made on behalf of StoneX Markets LLC (“SXM”), a member of the National Futures Association (“NFA”) and provisionally registered with the U.S. Commodity Futures Trading Commission (“CFTC”) as a swap dealer. SXM’s products are designed only for individuals or firms who qualify under CFTC rules as an ‘Eligible Contract Participant’ (“ECP”) and who have been accepted as customers of SXM. StoneX Financial Inc. (“SFI”) is a member of FINRA/NFA/SIPC and registered with the MSRB. SFI is registered with the U.S. Securities and Exchange Commission (“SEC”) as a Broker-Dealer and with the CFTC as a Futures Commission Merchant and Commodity Trading Adviser. References to securities trading are made on behalf of the BD Division of SFI and are intended only for an audience of institutional clients as defined by FINRA Rule 4512(c). References to exchange-traded futures and options are made on behalf of the FCM Division of SFI . StoneX is a trading name of StoneX Financial Ltd (“SFL”). SFL is registered in England and Wales, Company No. 5616586. SFL is authorized and regulated by the Financial Conduct Authority [FRN 446717] to provide to professional and eligible customers including: arrangement, execution and, where required, clearing derivative transactions in exchange traded futures and options. SFL is also authorised to engage in the arrangement and execution of transactions in certain OTC products, certain securities trading, precious metals trading and payment services to eligible customers. SFL is authorised & regulated by the Financial Conduct Authority under the Payment Services Regulations 2017 for the provision of payment services. SFL is a category 1 ring-dealing member of the London Metal Exchange. In addition SFL also engages in other physically delivered commodities business and other general business activities which are unregulated and not required to be authorised by the Financial Conduct Authority. StoneX Group Inc. acts as agent for SFL in New York with respect to its payments services business. StoneX APAC Pte. Ltd. acts as agent for SFL in Singapore with respect to its payments services business. ‘StoneX’ is the trade name used by StoneX Group Inc. and all its associated entities and subsidiaries.
Trading swaps and over-the-counter derivatives, exchange-traded derivatives and options and securities involves substantial risk and is not suitable for all investors. Past performance of any futures or option is not indicative of future success. Indicators are not a trading system and are not published as a specific trade recommendation. The information herein is not a recommendation to trade nor investment research or an offer to buy or sell any derivative or security. It does not take into account your particular investment objectives, financial situation or needs and does not create a binding obligation on any of the StoneX group of companies to enter into any transaction with you. You are advised to perform an independent investigation of any transaction to determine whether any transaction is suitable for you. No part of this material may be copied, photocopied or duplicated in any form by any means or redistributed without the prior written consent of StoneX Group Inc.
© 2025 StoneX Group Inc. All Rights Reserved.
Discover more insights
