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
Bullish
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
Bearish
Wall Street
Bearish
Gold
Mixed
GBP/USD
Bullish
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
USD/JPY
Bearish
More View more
Real Time News
  • 🇫🇷 Business Confidence (OCT) Actual: 93 Expected: 96 Previous: 96 https://www.dailyfx.com/economic-calendar#2020-10-22
  • Heads Up:🇫🇷 Business Confidence (OCT) due at 06:45 GMT (15min) Expected: 96 Previous: 96 https://www.dailyfx.com/economic-calendar#2020-10-22
  • 🇩🇪 GfK Consumer Confidence (NOV) Actual: -3.1 Expected: -2.8 Previous: -1.7 https://www.dailyfx.com/economic-calendar#2020-10-22
  • What are some trading mistakes @nickcawley1 made during his career and what did he learn from them? Find out:https://t.co/y3cckNW22W https://t.co/DWXPd1Fa8E
  • 🇳🇴 Unemployment Rate (AUG) Actual: 5.3% Expected: 5.1% Previous: 5.2% https://www.dailyfx.com/economic-calendar#2020-10-22
  • 🇩🇪 GfK Consumer Confidence (NOV) Actual: -3.1 Expected: -2.8 Previous: -1.6 https://www.dailyfx.com/economic-calendar#2020-10-22
  • Heads Up:🇳🇴 Unemployment Rate (AUG) due at 06:00 GMT (15min) Expected: 5.1% Previous: 5.2% https://www.dailyfx.com/economic-calendar#2020-10-22
  • Heads Up:🇩🇪 GfK Consumer Confidence (NOV) due at 06:00 GMT (15min) Expected: -2.8 Previous: -1.6 https://www.dailyfx.com/economic-calendar#2020-10-22
  • Traders utilize varying time frames to speculate in the forex market. The two most common are long- and short-term-time frames which transmits through to trend and trigger charts. Learn more about time-frame analysis here: https://t.co/UalZ8cRSXB https://t.co/O7fLzs4TqT
  • 🇳🇱 Consumer Confidence (OCT) Actual: -30.0 Previous: -28.0 https://www.dailyfx.com/economic-calendar#2020-10-22
US Dollar, Brazilian Real Brace for FOMC and Selic Rate Decisions

US Dollar, Brazilian Real Brace for FOMC and Selic Rate Decisions

2019-09-18 00:00:00
Dimitri Zabelin, Analyst
Share:

Brazilian Real, Selic Rate Decision, US Dollar, FOMC Meeting –TALKING POINTS

  • BCB expected to cut Selic rate by 50bp – Brazilian Real may fall if officials amplify dovish expectations
  • Global markets will also be turning their attention to the FOMC rate decision: will the Fed ease up?
  • US Dollar may rise on risk aversion if Powell cools aggressive rate cut bets as global economy slows

Learn how to use political-risk analysis in your trading strategy!

For the rest of the week, global markets may have to contend with significant volatility as several central banks prepare to announce their rate decisions against the backdrop political turmoil and flailing oil markets. In Brazil, policymakers are anticipated to cut the benchmark Selic rate by 50 basis points, leaving it at an all-time low of 5.50 percent. Markets are expecting for interest rates to be as low as 5.00 percent by year-end.

Taking it “Easing”

US Dollar, Brazilian Real Brace for FOMC and Selic Rate Decisions

Source: Bloomberg.

Economic ailments from 2018 spilled over into 2019 as the country wrestles with passing key pension reforms that could be only thing standing between them and a recession according to Finance Minister Paulo Guedes. Foreign direct investment has made a significant recovery after plummeting to six-year lows on a quarterly timeframe, and geopolitical oscillations and wobbly growth prospects has kept investors on their toes.

Lackluster growth and weakening demand for iron ore out of China – Brazil’s largest trading partner – has caused previously “symmetric” inflationary pressure to now tilt to the downside. Uncertainty about progress on the structural reforms has been a key factor behind waning consumer and producer confidence. BCB policymakers – much like the BoE and Brexit – are somewhat constrained by the local political environment.

Yields Declining as Investors Anticipate More Rate Cuts Down the Road

US Dollar, Brazilian Real Brace for FOMC and Selic Rate Decisions

Source: Bloomberg. Note: Decline in bond yields and CDS spread during election signaled markets were optimistic about Bolsonaro’s pension reform and the ability of his government to stabilize the country’s finances.

FOMC Rate Decision: Volatility Ahead

The headline event risk for the week will be the FOMC rate decision with overnight index swaps pricing in an 85.4 percent chance of a 25-basis point rate cut. However, the market’s ultra-dovish expectations for further easing could be once again cooled by Mr. Powell who has reiterated for the past year that the central bank is on a data-dependent path.

What is more telling, however, is how the US Dollar has performed against this backdrop. Despite market expectations growing increasingly more dovish, the Greenback has continued to rise. This suggests that the US Dollar’s appeal as the most liquid currency is rising, possibly indicating underlying premonitions about future market conditions.

US Dollar Climbs Despite Mounting Rate Cut Bets

US Dollar, Brazilian Real Brace for FOMC and Selic Rate Decisions

US Dollar chart created using TradingView

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