Brazilian Real: Dollar and interest rate futures open week high

RIO DE JANEIRO, BRAZIL – Near 10 AM Monday, July 12, the commercial dollar advanced 0.75% to R$5.2735, amid the currency’s appreciation against both strong rivals and emerging currencies. By early afternoon, however, it had fallen substantially.

“Investors continue to monitor the developments of the rapid spread of the Delta variant of the coronavirus around the globe, in this week of the release of important indicators of the U.S. economy, beginning of the season of balance sheets in the country and speech by Jerome Powell [president of the Federal Reserve (Fed), the U.S. central bank],” say the economists of Renaissance.

The professionals also point out that in China, the country’s central bank confirmed expectations and announced a cut in the compulsory banking rate of 0.50 percentage points last Friday, which also provides a negative bias for international markets today.

The local financial markets return to normal operations today, after the state holiday in São Paulo on Friday, when risk assets abroad had a positive session, as the stock markets in the United States reached new records.

Commcor evaluates that the “new turn in local political tensions” has been increasingly limiting the potential of Brazilian assets to follow the good mood abroad, citing, in this sense, the new round of strong depreciation of the real.

On Friday, President Jair Bolsonaro, defending the printed ballot and citing the chance of no elections in 2022, added to the recent escalation in political tension. Senate President Rodrigo Pacheco and the president of the Superior Electoral Court, and Supreme Court Justice Luís Roberto Barroso reacted against the president’s remarks.

The backdrop of the political issue remains the unfolding of the Senate Covid CPI, in the wake of the arrest of the former director of Logistics of the Ministry of Health, Roberto Dias, implicated in suspected corruption in the purchase of vaccines, and the repudiation note of the Armed Forces, after speeches of the senator president of the commission, Omar Aziz, about the “rotten side” of the armed forces.

On the interest rate side, it is worth pointing out that the Focus Bulletin of the Central Bank (BC) showed a marginal decrease in the median of the economists’ projections for the IPCA in 2022 from 3.77% to 3.75%, which supports a slight drop in future short-term rates. Moreover, the Focus pointed out that the mid-point for the Selic at the end of this year rose from 6.50% to 6.63%, and at the end of next year, from 6.75% to 7%.

With the day’s agenda empty, financial agents are closely following the public appearance of the Central Bank Monetary Policy Director, Bruno Serra Fernandes, in search of new signals about the monetary authority’s next steps.

At 3:00 pm, the director will participate in a live event organized by Santander to discuss the outlook for the economy and monetary policy. The future interest curve still shows that investors give a majority chance of a 1 percentage point increase in the SELIC rate in the August Monetary Policy Committee (Copom) meeting.

At 10 AM, the rate of the Interfinancial Deposit (DI) contract for January 2022 went from 5.82% to 5.815%; the DI for January 2023 advanced from 7.29% to 7.31%; the contract for January 2025 increased from 8.30% to 8.32% and the DI for January 2027 varied from 8.70% to 8.74%.