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Brazilian Forex Regulations: Navigating Trading Standards – The USDBRL closed the week lower, ending the session on Friday (25) trading at BRL 4,875, a variation of -1.8% in the week, +3.1% in the month and -7.7% in the year. The dollar index closed Friday’s session higher for the sixth consecutive week, trading at 104.2 points, a weekly gain of 0.8%, a monthly gain of 2.5% and an annual gain of 0.9%. The foreign exchange market echoed Jerome Powell’s speech in Jackson Hole, the final approval of the fiscal framework in Congress and the persistent concerns about the Chinese economy.
Investors’ attention this week is expected to be on the abundant release of US economic indicators, with readings for economic activity, the labor market and consumer prices. This week, the release of the August Employment Outlook Report should show new job creation remaining in positive territory, but with a slight moderation compared to previous months. There are small signs of a slowdown in the labor market, such as a drop in the number of temporary workers and a decline in average weekly hours worked, but they are still discreet and do not allow us to say that the worker shortage has abated.
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In addition, the Personal Consumption Expenditure Price Index (PCE) for August, the metric most used by the Federal Reserve to track consumer inflation, will be released, with expectations of a moderate new reading for the third consecutive month, with expectations of growth. of approximately 0.20% for both the full index and its core. However, the prices of non-rental services (called super basic services) may increase slightly, around 0.40%. Some Fed officials have highlighted the influence of this services segment on the recent inflationary trend, and a slightly higher increase in this group may encourage Fed members to maintain a more cautious stance in upcoming rate decisions.
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The second advance of the Gross Domestic Product of the United States for the second quarter of 2023 will also be released, with the expectation of a revision of growth from 2.0% to 2.4% at an annualized rate. Finally, the industrial Purchasing Managers’ Index (PMI) for August will be released, with an expected retraction (ie, a reading below 50 points) for the tenth consecutive month, continuing the negative performance of US manufacturing activity.
Brazilian GDP growth is expected to lose momentum significantly in the second quarter, from 1.9% growth over the immediately preceding quarter to just 0.3%. Agriculture is expected to contract, offset by modest growth in industry and services. The data should show that the Brazilian economy has some resilience, but that the tighter macroeconomic environment, with long-term high interest rates, has reduced the capacity for more robust expansion.
After the important approval of the Complementary Bill of the fiscal framework (PLP 93/2023) this week and the Provisional Measure that readjusts the minimum wage by the National Congress, the focus falls on the ministerial reform promised and constantly postponed in the government of Luiz. Inácio Lula da Silva that he would seek to give more space to the parties of the so-called Centrão.” According to the newspaper O Globo, the Brazilian president is expected to promote the changes this week when he returns from international commitments.
After the discontent of the deputies for the criticism made by the Minister of Finance, Fernando Haddad, to the Chamber of Deputies, the meeting of party leaders to discuss the vote on the Fiscal Framework Bill (PLP 93/2023) was postponed to this Monday (21). If there is an agreement, the vote could take place this week. The text approved in the Federal Senate was different from the one approved by the Chamber and, therefore, the procedural rite requires that the deputies analyze only the modifications to the project, that is, the points modified by the senators, accepting the suggestions or returning to the text initially approved in the lower house. However, some political analysts question this possibility due to the constant postponements of the ministerial reform in the government of Luiz Inácio Lula da Silva that would seek to accommodate more spaces for the parties of the so-called “Centrão” (center-right coalition).
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The release of China’s official Purchasing Managers’ Indices (PMI) for August should show the slowing trend in economic activity in the country, both for services, which are expected to grow slightly, and for industry, which it is expected to contract gently. Amid a series of lower-than-expected indicators for Chinese economic growth and uncertainties about the stability of the real estate sector, such readings could deepen investor pessimism about the country’s recovery prospects and hurt the performance of risky assets such as the Brazilian real.
Our Brazil team provides regular weekly coverage of the Brazilian economy and the outlook for the Real, accessible by clicking the link in the banner above.
Analysis by: Leonel Oliveira Mattos (leonel.mattos@stonex.com ), Alan Lima (alan.lima@stonex.com ) and Vitor Andrioli (vitor.andrioli@stonex.com ). Translation by Rodolfo Abachi (rodolfo.abachi@stonex.com).
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Trading CFDs and FX on margin carries a high level of risk which may not be suitable for some investors. Carefully consider your investment objectives, level of experience, financial resources, risk appetite and other relevant circumstances. There is a possibility that you may lose some or all of your investments, including your initial deposits. If in doubt, seek advice from independent experts. Visit /en-sg/terms-and-policies for the complete Risk Disclosure Statement. Doing Business in Brazil Global Trade Review, July 12, 2021 Although we are still dealing with the consequences of the Covid-19 pandemic, there may be long-term positives in store. for Brazil, where the economy is currently undergoing structural changes that will affect important aspects of the business environment and open up new opportunities for companies.
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Brazil has been one of the countries hardest hit by Covid-19, which darkened economic prospects and caused a 4.1% drop in GDP last year, according to the World Bank.
. The recovery momentum is expected to propel Brazil’s growth to 3% in 2021, although this is subject to great uncertainty, particularly in terms of the impact of the new wave of the pandemic and the pace of vaccination.
It has been widely reported that Brazil has had problems with the launch of its vaccination campaign against Covid-19. But the country has a history of successful immunization programs and is now in a position to scale up production and distribution. “Brazil has taken a while to catch up, but it’s gaining ground now, which is good,” says André Carvalho, Citi’s director of LatAm Trade, Treasury and Business Solutions. Trade is expected to make a positive contribution to Brazil’s economic growth this year.
, the country’s trade surplus widened to $10.35 billion in April 2021, from $6 billion in the same month a year earlier, and compared to market expectations of $11.4 billion. Imports in April grew 41.1% to 16.13 billion dollars. Exports in April increased by 50.5% compared to the previous year to 26.480 million dollars amid higher sales of manufactured products (43.9%), mining goods (73.2%) and agricultural products (44.4%). %). Among Brazil’s main trading partners, exports increased to China (55.1%), the EU (37%) and the United States (33.7%).
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With the Brazilian real plummeting 30% last year and commodity prices continuing to recover, all indications are that export growth will continue.
“The real has underperformed, which for exports is a positive factor; it is almost a perfect scenario for Brazilian exporters”, says Carvalho. “We are also seeing good momentum thanks to
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