Final adjustment of the overhedge will guide the exchange rate in the last week of the year, which should continue with low liquidity. Interest rate market checks whether inflation expectations will continue to improve at Focus. Agenda still highlights IGP-M and fiscal results in Brazil and PMIs in the China. B3 (B3SA3) will have an auction of Cedae.
overhedge
BC is on track to complete the overhedge adjustment at the end of the year. Actions for this purpose add up to US$ 17.5 billion after the US$ 700 million auction held this Wednesday.
As the auctions have been held every Monday and Wednesday, in theory there would still be room for two more actions, which would raise the total to almost US$19 billion. The expectation among analysts, however, is that the BC will carry out at most one more auction, completing a total of US$ 18.2 billion.
Position adjustment refers to a regulatory change that forced banks to reduce the additional hedge of their assets abroad. Half of this adjustment was made last year and the other half is being done now. In spot actions, the BC has already sold US$ 3.9 billion since December 10th. The BC has also anticipated that it will start rolling over March swaps on January 3rd.
Focus e IGP-M
Next Monday’s Focus will be carefully evaluated after this week’s survey shows a slight drop in IPCA projections for 2023 and 2024. A pullback was seen as an early sign that the BC may already be able to re-anchor long-term expectations, which helped ease the yield curve in recent days.
The December IGP-M comes out on Wednesday, with an estimated acceleration of the monthly data to 0.63%. Futures rates rose again this Friday after a brief downward reaction to December’s IPCA-15.
The index was below expectations, but still remains at a high level and requires caution from the BC, according to analysts. Week will still have fiscal result and national unemployment rate.
External agenda
In a rare week in terms of indicators, China will release its December manufacturing PMI on the 30th. The estimate is that the index will fall from 50.1 to 49.9, slightly below the measure of 50, which determines contraction or expansion.
For the services PMI, the estimate is for a deceleration from 52.3 to 51.8. US to announce pending home sales and unemployment claims. Without indicators with the potential to have a greater impact on business, the market should continue to react to the news about omicron and the Biden government’s economic plan in the US.
fiscal pressures
Although the 2022 budget has already been approved by Congress, pressures for more spending still persist. According to the newspapers, the economic team has been pressured to extend salary readjustments to all employees, after some categories were contradicted by President Bolsonaro’s decision to give raises only to federal police officers.
There are still moves in the political area to raise the value of Auxílio Brasil from R$ 400 to 600 to help the governing base in the elections, but minister Paulo Guedes’ team argues that there is no fiscal space and a further deterioration of public accounts could harm the economy, costing the president’s reelection.
Cedae
The auction of Block 3 by Cedae, a sanitation company from Rio de Jeneiro, will take place on December 29th. According to the BNDES, at this stage the winner of the auction, to be held at B3 in São Paulo, should universalize the supply of water and sewage treatment to more than 2.7 million people in up to 11 years, according to the new legal framework for sanitation.
Source From: Moneytimes
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