Dollar (USDBLR) jumps almost 2% after US employment report and Lula’s criticism of BC autonomy
O dollar (USDBLR) soared nearly 2% against the real this Friday, after a report from job surprisingly strong government U.S reduced hopes of an easing of the monetary tightening of the Federal Reservewhile investors continued to echo the president’s criticism Luiz Inacio Lula da Silva to the independence of central bank.
On the spot market, the dollar rose 1.98%, to 5.1456 reais on sale, far from intraday levels below 5 reached the day before.
The currency had the highest daily percentage gain since last November 10 (+4.10%) and the highest closing quote since January 23 (5.1993)
In the week, the North American currency advanced 0.64%.
The dollar soared globally after the US Labor Department reported on Friday that 517,000 jobs opened outside the country’s agricultural sector last month.
The reading was well above the 185,000 jobs expected by economists polled by Reuters.
The data “shows that the job market is very tight, with no signs of significant cooling in the short term,” said Nicole Kretzmann, chief economist at UPON Global Capital. “Therefore, it greatly increases the likelihood that the Fed will need to keep monetary policy tighter and longer.”
After this Friday’s employment data, the US futures market began to reflect greater chances that the Fed will not stop raising interest rates until it reaches the range of 5% to 5.25%.
Ahead of the report, traders viewed a break of just under 5% as more likely, particularly after central bank chair Jerome Powell on Wednesday hailed a recent cooldown in US inflation data.
Stronger-than-expected data from the US services sector, whose activity rebounded sharply in January, supported the prospect of a still-tough stance by the Federal Reserve.
Higher interest rates in the world’s largest economy tend to redirect resources away from riskier assets to the extremely safe US fixed income market.
In this context, the dollar index against a basket of strong pairs advanced more than 1% this afternoon.
According to Denilson Alencastro, chief economist at Geral Asset, recent speeches by Lula also contributed to the increase in the dollar against the real in this session, who said on Thursday in an interview with RedeTV that he may seek to review the autonomy of the Central Bank when the end of the mandate of the current president of the institution, Roberto Campos Neto, in 2024.
Lula has frequently criticized the high interest rate and the BC’s independence, saying that the institution does not do more now than when its president was changed whenever a new government took office.
Separately, its Minister of Science, Luciana Santos, said at an event with students on Thursday that the Central Bank needs to reduce interest rates and that this will have to be guaranteed “in the streets”, suggesting a mobilization of the government team behind this agenda. .
On the other hand, the governing leader in Congress, Senator Randolfe Rodrigues (Rede-AP), said this Friday that the autonomy of the Central Bank is not on the government’s agenda and that Lula has not asked for the elaboration of a legislative proposal to revert the formal independence of the monetary authority.
The day before, the dollar was traded below 5 reais for the first time since June last year, which Diego Costa, head of exchange for the North and Northeast of B&T Câmbio, attributed in part to the Central Bank’s monetary policy statement. , which on Wednesday kept the Selic at 13.75% and indicated higher interest rates for longer.
“Here, the Bacen kept the rate unchanged and indicated that it should not go back any time soon, going against the grain of recent pronouncements by government representatives who wanted a brief retreat and began to ventilate the possibility of revising the autonomy of the Central Bank”, said Costa .
High borrowing costs in Brazil make the real more attractive to use in strategies that seek to profit from interest rate differentials across economies. On the other hand, they tend to cool down economic activity, which in the short term could work against the Lula government’s development agenda.
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