Market Reactions: Dollar and Ibovespa Flourish Amid US Interest Rate Concerns

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The dollar is performing well, and the Ibovespa, the major stock index on the Brazilian stock market, is also experiencing positive trends. Investors remain concerned about the trajectory of interest rates in the United States, which continues to impact these markets. Just over a month ago, the Ibovespa reached its lowest level ever at 128,524 points, representing a 0.60% decline from the previous trading session. At that time, the dollar was valued at R$4.9296, with a 0.09% increase.

In the current session marked by uncertainty surrounding US interest rates, the dollar has reversed its previous signal and is now performing higher. This shift in the dollar’s movement coincides with the anticipation of a speech by a director of the Federal Reserve (Fed), the American central bank, later in the day. Today’s economic agenda is relatively weak both in Brazil and internationally.

Weekly statistics on unemployment insurance in the United States indicate signs of strength in the labor market, which is being closely analyzed by investors. Meanwhile, the Ibovespa, the major stock index in Brazil’s B3 market, is currently trading at a low level.

Looking at the latest updates on the markets:

Dollar:
At 11:10 am, the dollar was valued at R$4.9353, representing a 0.12% increase from the previous trading session. It is important to browse further quotations for a more comprehensive analysis. The day prior, the North American currency had experienced a 0.09% increase, reaching R$4.9296.

Over the past week, the dollar has witnessed a 1.50% improvement. Furthermore, on a monthly and annual basis, it has seen improvements of 1.59%.

Ibovespa:
Simultaneously, the Ibovespa has dropped by 0.03% and is currently at 128,483 points. The previous day’s decline amounted to 0.60%, bringing the index to its lowest position in almost a month, at 128,524 points.

Over the past week, the Ibovespa has experienced a drop of 1.88%. Moreover, it has witnessed drops of 4.22% over the past month and year.

Considering the less robust economic agenda, global markets remain relatively stable as investors await fresh figures and speeches. In the United States, all eyes are on the Federal Reserve and its officials’ statements. Today, there is widespread anticipation for a speech by Raphael Bostic, the president of the Atlanta Fed.

Recent statements by international leaders have been more cautious when discussing the possibility of a cut to interest rates in the world’s largest economy. It is believed that no action should be taken to lower the benchmark interest rate until the Fed’s chairman, Christopher Waller, affirms that low inflation will be maintained.

Despite the United States approaching its inflation goal of 2%, Waller emphasized that any cutbacks should be implemented in a “methodical and careful” manner, avoiding hasty decisions. These remarks contrast with recent market expectations, as investors have been betting on the North American central bank to initiate interest rate cuts in March and potentially reduce rates by 1.5 percentage points by the end of the year.

However, these expectations are starting to shift. The CME Group’s FedWatch tool shows that 61% of investors believe the Fed will begin reducing interest rates in March. By the end of 2023, this figure has risen to 80%.

Since July, the Federal Reserve has maintained a base rate between 5.25% and 5.5%. The market continues to closely monitor any updates or indications of a change in interest rates, as it has a significant impact on the dollar and the Ibovespa.