Dollar falls to R$5.07, lowest value in almost a month, after weak employment data in the USA

The dollar ended the session with a strong drop of around 0.85% and went to R$5.069 when buying and R$5.07 when selling this Friday (3), after data from the US employment report for April . Job creation in the United States slowed more than expected last month and annual wage gains cooled.

This is the lowest closing price in almost a month, since April 9, when the currency closed at R$5.0067. In the accumulated result for the week, the US currency fell 0.93%.

The U.S. economy added 175,000 nonfarm jobs last month, the Labor Department said in its jobs report on Friday. March data was revised upwards, showing 315,000 job openings, instead of 303,000 as previously reported. Economists consulted by Reuters predicted 243,000 job openings, with estimates ranging from 150,000 to 280,000.

The day before, the American currency had already recorded the biggest percentage drop in a single day since August 23rd of last year.

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What is the dollar exchange rate today?

At the end of the day, the spot dollar fell 0.85%, to R$5.069 when buying and R$5.070 when selling. On B3, the first-month dollar futures contract fell 0.86%, equivalent to 5,082 points.

Commercial dollar

Sale: R$5,070

Purchase: R$5,069

Tourism dollar

Sale: R$ 5.29

Purchase: R$ 5.11

Read more: Types of dollars: find out the main ones and the importance of the currency

The dollar falls sharply following lower-than-expected US employment data, reviving hopes of more extensive monetary easing by the Federal Reserve.

This move was in line with the dollar index’s decline of about 0.6% against a basket of strong peers, after job creation in the United States slowed much more than expected in April and earnings annual salaries fell.

“The week is certainly ending in a more constructive way than it started, with the markets positively evaluating both the FOMC communications and the labor market data package”, assessed Danilo Igliori, chief economist at Nomad. “The month is just beginning, but it is possible that May will bring another turnaround in expectations about the trajectory of interest rates in the US, this time to the positive side.”

In the wake of the data, traders increased bets that the Federal Reserve will make its first interest rate cut in September, with part of the markets that saw this movement only starting in November, bringing forward their projections.

Implied probabilities in interest rate futures contracts now point to about a 78% probability of a rate cut at the U.S. central bank’s mid-September meeting, up from 63% recorded before the report. Traders are also now pricing in two 25 basis point cuts by the Fed this year, compared with one expected before the data was released.

This week, Fed officials unanimously decided Wednesday to keep the interest rate in the 5.25% to 5.5% range it has been in since July. And although Fed Chair Jerome Powell has indicated that high inflation could delay the expected rate cut, he has refused to endorse discussions that the rate could actually be raised again.

The more the US central bank cuts interest rates, the worse for the dollar, which becomes comparatively less attractive when US government bond yields decline. In Brazil, the Central Bank will meet next week to define monetary policy, amid considerable expectation in the markets that high uncertainty could lead the local authority to slow down the pace of cutting the Selic rate.

Rafaela Vitoria, chief economist at Banco Inter, wrote that this Friday’s US employment data means that a 0.50 percentage point cut by the BC “remains on the table”, although probabilities implicit in interest rate futures contracts calculate around 80% chance of reduction of just 0.25 points.

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(with Reuters)