Dollar rises with external caution amid worsening fiscal data and positive retail

The dollar rises against the real, following the appreciation of the American currency and the returns on two- and ten-year Treasuries in the USA and after the worsening of the result of the government’s consolidated public sector in September.

This morning, at an Insurance Law conference in Brasília, the Minister of Finance, Fernando Haddad, stated that the “constitutional tax amendment will be enacted this year, God willing.”

According to the minister, “the commitment to a neutral tax reform does not prevent us from repairing the erosion of the tax base.” Haddad asked for support for this event so that the Senate can complete its work on the insurance framework.

Investors adjust positions as they wait for Federal Reserve President Jerome Powell’s speech (11am) and the vote on the tax reform proposal in the Senate plenary (2pm), while also evaluating the positive result of retail sales in Brazil in September and acceleration of inflation, with the IGP-DI rising to 0.51% in October (compared to +0.45% in September) and the IPC-S rising to 0.53% in the first four weeks of November.

The foreign exchange market is experiencing a slight profit-taking, after the spot dollar closed lower on Tuesday at R$ 4.8750 – lowest closing value since September 19 -, for the fifth consecutive session and, in November, accumulated loss of 3.30% compared to the real. In addition to the prospect of maintaining a favorable internal and external interest differential in the coming months, the real has benefited in recent sessions from the significant flow of resources via foreign trade and the progress of the economic agenda in Congress.

The consolidated public sector (Central Government, States, municipalities and state-owned companies, with the exception of Petrobras and Eletrobras) recorded a primary deficit of R$18.071 billion in September, the worst result for the month since 2020 and also worse than the median surplus of R$9. 60 billion calculated by Projeções Broadcast research.

Retail sales rose 0.6% in September compared to August, in the seasonally adjusted series, reported the Brazilian Institute of Geography and Statistics (IBGE). The result was above the median forecast of analysts heard by Projeções Broadcast, an increase of 0.1%. The range of estimates ranged from a drop of 1.3% to an increase of 0.7%. In comparison with September 2022, without seasonal adjustment, retail sales increased by 3.30% in September. In this comparison, projections ranged from a drop of 0.2% to an increase of 3.6%, with a positive median of 2.3%.

The market also remains attentive to comments from other directors of the American central bank. Federal Reserve Director Lisa Cook said on Wednesday that the United States economy is reasonably resilient, but that leaders are considering the risks of high interest rates or economic shocks. “Any shock – for example, geopolitical conflicts – can increase uncertainties related to the development of the economy,” she said, during a panel at the 2023 Conference on the Financial System.

At 9:40 am, the dollar in cash rose 0.33%, to R$4.8913. The dollar for December gained 0.39%, at R$4.9015.