Good Morning ADVFN: Dollar and DIs remain stable awaiting interest rate decisions in Brazil and the USA (01/11/2023)

The dollar and future interest contract rates operated without a defined direction this Wednesday, the most awaited day of the week, awaiting monetary policy decisions from the Monetary Policy Committee (Copom), the Central Bank of Brazil, and the Committee Federal Open Market (Fomc), of the Federal Reserve, in the United States.

At around 9:25 am, the spot dollar fell 0.13%, to R$5.0295, and the future dollar fell 0.16%, to R$5.046.

The US currency was performing strongly overseas, especially compared to stronger and more liquid peers. In a basket of 23 currencies, the dollar gained ground against 14. In this context, the DXY Index rose 0.16%, to 106,885 points.

Earlier, the monthly variation of private jobs in the US from the ADP survey registered 113 thousand vacancies in October, well below market expectations, which predicted 150 thousand. The data contributed to the appreciation of emerging currencies, such as the real, due to the feeling of less risk aversion with the sign of a less heated American economy, which tends to lead future interest rates downwards.

The market expects the BC to cut the Selic by 50 basis points for the third consecutive time, according to TC Consenso. However, agents differ on the terminal rate after the down cycle. In the US, the expectation is that the Fed will maintain the rate in the range between 5.25% and 5.50%.

Although interest rate decisions are priced, great expectations fall on the announcements. This is because financial agents seek to anticipate to what extent the Fed will keep interest rates at high levels, before starting to cut the rate, and until when the BC will continue to cut the Selic rate.

At the time above, DIs maturing in Jan/25 and Jan/27 rose 2.0 basis points and 3.0 bps, respectively, to 11.10% and 11.25%. The peak for Jan/31 rose 2.0 basis points, to 11.79%.

International stock exchanges operate without a single direction this Wednesday, awaiting the decision on American interest rates. Investors continue to digest the earnings season. In Brazil, on the eve of a long holiday, the big highlight will be the release of the Selic rate by the Monetary Policy Committee (Copom).

The market expectation is that the Federal Reserve will maintain interest rates in the range between 5.25% and 5.50%, in the face of continued pressure caused by the rise in yields on long-term US Treasury bonds. This morning, ten-year Treasuries rise 3 basis points, above 4.90%.

At the corporate level, British pharmaceutical giant GSK rose more than 1% this morning, after the company increased profit and revenue projections for the year. Now, investors are waiting for Kraft Heinz’s numbers in the US before the market opens. After the closing, it will be Qualcomm and AIG.

In the Middle East, Israel admitted to attacking a refugee camp in Gaza. Israeli military claims to have killed a senior commander of the terrorist group Hamas. However, it is estimated that more than 100 Palestinians were killed, including children and women, raising accusations of war crimes against Israel.

In Asia, markets closed once again mixed, with the Japanese yen falling sharply since yesterday and activity data in China below 50 points, indicating a decline. In Europe, the UK industrial PMI reached 44.8 points in October, below the estimate of 45.20 points, attesting to the difficulty in recovering activity.

In the US, the Fed’s decision takes place at 3pm, with the press conference by the president of the monetary authority, Jerome Powell, starting at 3:30pm. At 8 am, the weekly mortgage index will be released, while at 9:15 am ADP will release the variation in private jobs for October. The projection indicates the creation of 150 thousand jobs.

At 10:45 am, S&P Global releases the industrial PMI for October, as does the ISM, which also releases the same indicator. The expectation is that both will come in below 50 points. At 11 am, the Department of Labor releases the Jolts job offer for September, with a forecast of 9.25 million job openings. At 11:30 a.m., the Department of Energy releases last week’s oil inventories.

In Brazil, the Copom is expected to cut the Selic by 50 basis points for the third consecutive time, going from 12.75% to 12.25% per year. Expectations surround the statement, which will probably continue to anticipate the same pace of cuts for the next meetings and reiterate the intention to maintain monetary policy at a contractionary level.

Brazilian industrial production rose 0.1% in September on a monthly basis, a worsening when compared to the 0.4% increase in August, according to the Brazilian Institute of Geography and Statistics (IBGE) this Wednesday. Despite the worsening, the data was above the projection, which estimated a drop of 0.1%.

At 10 am, S&P releases the industrial PMI for October, while at 3 pm the Ministry of Development, Industry, Commerce and Services (MDIC) releases the trade balance for October, with a projection of a surplus of US$9 billion.

On the eve of the long holiday, agents are just waiting for the release of the third quarter results of Banco Pan, controlled by BTG Pactual, before the opening of trading.

Yesterday, the Ibovespa closed higher, in line with the rest of the world, pending monetary policy decisions in Brazil and the USA. In the foreign exchange market, the dollar closed lower, with an eye on Super Wednesday and Ptax at the end of the month.