News & Analysis at your fingertips.

We use a range of cookies to give you the best possible browsing experience. By continuing to use this website, you agree to our use of cookies.
You can learn more about our cookie policy here, or by following the link at the bottom of any page on our site.

0

Notifications

Notifications below are based on filters which can be adjusted via Economic and Webinar Calendar pages.

Live Webinar

Live Webinar Events

0

Economic Calendar

Economic Calendar Events

0
Free Trading Guides
EUR/USD
Mixed
Low
High
of clients are net long.
of clients are net short.
Long Short

Note: Low and High figures are for the trading day.

Data provided by
Oil - US Crude
Mixed
Wall Street
Mixed
Gold
Bearish
Low
High
of clients are net long.
of clients are net short.
Long Short

Note: Low and High figures are for the trading day.

Data provided by
GBP/USD
Mixed
USD/JPY
Mixed
More View more
Real Time News
  • IG Client Sentiment Update: Our data shows the vast majority of traders in Ripple are long at 96.72%, while traders in EUR/USD are at opposite extremes with 72.70%. See the summary chart below and full details and charts on DailyFX: https://www.dailyfx.com/sentiment https://t.co/C9mpbatCwo
  • GDP (Gross Domestic Product) economic data is deemed highly significant in the forex market. GDP figures are used as an indicator by fundamentalists to gauge the overall health and potential growth of a country. Learn use GDP data to your advantage here: https://t.co/38gTDn8ejP https://t.co/tAokLiuesJ
  • US President Donald Trump: Johnson & Johnson, Moderna doing well on vaccine -BBG
  • Let me know if they say anything about actual economic or fiscal policy. There is a Murder She Wrote marathon on
  • Heads Up:🇺🇸 Presidential Debate due at 01:00 GMT (15min) https://www.dailyfx.com/economic-calendar#2020-10-23
  • The British Pound may fall if EU and UK negotiators fail to reach a consensus as the December 31 deadline nears. The third presidential debate is on deck, how might markets react? Find out from @ZabelinDimitri here:https://t.co/kDSYzBDA3t https://t.co/7bZVhygGzW
  • 6 out of 9 Dow Jones sectors closed in the green, with 73% of the index’s constituents ending higher on Thursday. Energy (+3.57%), financials (+1.99%) and industrials (+1.93%) were leading, whereas information technology (-0.52%) and consumer staples -0.49%) were lagging. https://t.co/ClzN5LtWLG
  • The Dow Jones, S&P 500 and AUD/USD could be at risk of extending losses as retail investors increase upside exposure. What are key technical levels to watch for? Find out from @ddubrovskyFX here:https://t.co/ivQmFUTGdU https://t.co/aTLUtE6OaE
  • 🇯🇵 Inflation Rate Ex-Food and Energy YoY (SEP) Actual: 0.0% Previous: -0.1% https://www.dailyfx.com/economic-calendar#2020-10-22
  • 🇯🇵 Inflation Rate YoY (SEP) Actual: 0.0% Previous: 0.2% https://www.dailyfx.com/economic-calendar#2020-10-22
Brazil Central Bank Slashes Selic Rate 50bp, Signals Future Cuts

Brazil Central Bank Slashes Selic Rate 50bp, Signals Future Cuts

2019-08-01 03:30:00
Dimitri Zabelin, Analyst
Share:

BRAZIL CENTRAL BANK, FOMC RATE DECISION – TALKING POINTS

  • Brazil central bank surprised investors and cut the Selic rate by 50 basis points
  • Slower local and global growth, pension reform optimism supports dovish policy
  • Brazil stocks, Brazilian Real may find themselves torn between dovish BCB, Fed

See our free guide to learn how to use economic news in your trading strategy!

BRAZIL CENTRAL BANK SURPRISES MARKETS: SLASHES SELIC RATE 50BP

Investors were caught off-guard when Banco do Brasil announced that it was slashing its benchmark Selic rate from 6.50 percent to 6.00 percent, the first reduction in borrowing costs since March 2018. Slower-than-expected price growth, a decelerating global economy, high “economic slack” and optimism about the market-disrupting pension reforms were the main reasons by the cut.

Banco do Brasil Cuts Selic Rate For First Time in Over a Year

Brazil Selic Rate

The unanimous decision came as a surprise, with most economists having estimated that the 9-committee Copom council would have favored a 25bp cut. The monetary policy statement put out by the central bank showed officials’ baseline scenario is a gradual recovery with “Economic conditions prescrib[ing] stimulative monetary policy, i.e., interest rates below the structural level”.

Optimism about the pension reform bill being signed into law and the anticipation that it will lead to significant capital inflow and a strong Brazilian Real was also a contributing factor. The bill survived a first-round vote in the lower house of Congress this month and is expected to undergo a second one next week. In their monetary policy statement, officials at the central bank highlighted the importance of these reforms on policy:

The Committee stresses that the perception of continuation of the reform agenda affects current expectations and macroeconomic projections. In particular, the Committee judges that concrete progress in this agenda is fundamental for the consolidation of the benign scenario for prospective inflation.

Given the central bank’s inflation expectations for 2019 through 2022, officials forecast the Selic rate will fall to 5.50 percent by the end of the year. However, if the fundamental outlook deteriorates it could force officials to adopt an even-more accommodative monetary policy. However, as a relatively closed economy, Brazil is comparatively more insulated from global shocks relative to some of emerging market peers.

Looking ahead, when Brazilian stock markets open, the Real will likely gap lower against the US Dollar while local equity markets may be buoyed by the prospect of cheap credit. However, if the Ibovespa fails to rally, it be an indication that investors in Brazil were more focused on the Fed than their local central bank’s monetary policy. Considering 80 percent of all global transactions are conducted in USD, this would not be shocking.

FX TRADING RESOURCES

--- Written by Dimitri Zabelin, Jr Currency Analyst for DailyFX.com

To contact Dimitri, use the comments section below or @ZabelinDimitrion Twitter

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.

DISCLOSURES