By: Leonel Mattos, Market Intelligence Analyst • BRAZIL PRS
USDBRL and Dollar Index (points)
USDBRL variations | Daily: +0.53% | Weekly: -1.31% | Monthly: -0.99% | Annual: -6.33% | In 12 months: -5.82%
Dollar Index variations | Daily: +0.16% | Weekly: -0.52% | Monthly: -0.28% | Annual: +0.83% | In 12 months: +0.86%
In the domestic political sphere, financial markets continue to monitor developments in the electoral race for the presidential elections in October.
Why this matters: A tight electoral race may reduce predictability regarding Brazilian economic policies for the next four years, increasing the perception of risks to national assets, amplifying volatility, and harming the performance of the real.
Disputed elections: Recent voter intention polls have indicated a narrowing of President Lula's advantage over Senator Flavio Bolsonaro, although both are still technically tied.
Tensions in the Supreme Court: Last week was marked by news involving Supreme Court Justice Alexandre de Moraes and former banker and Banco Master owner Daniel Vorcaro.
Production of the film Dark Horse: On the other hand, on Thursday (3), it was reported that the Attorney General's Office (PGR) closed a plea bargain agreement with Antonio Carlos Freixo Junior, nicknamed "Mineiro," who made dollar transfers on behalf of former banker Daniel Vorcaro for the production of the film "Dark Horse."
Bets for the Federal Reserve interest rate decision on September 16
The foreign exchange market is expected to react to the release of the US Consumer Price Index (CPI) and Producer Price Index (PPI) for August, seeking to calibrate expectations for the country's interest rate trajectory.
Why this matters: US inflation is unlikely to clearly signal a stabilization trend, increasing investors' bets on further interest rate hikes by the Federal Reserve, raising US Treasury yields, and attracting foreign capital to the country, strengthening the dollar globally.
Estimates: After two months of moderate US inflation figures, analysts anticipate a slightly warmer reading for August.
Interest rate hikes in doubt: If the projections are confirmed, the CPI should provide arguments for both sides of the debate. The index's acceleration would hinder a more comfortable signal from the Fed, while the moderation of the core would reduce evidence of a widespread worsening of inflation.
Stronger Payroll in August: Last week, the Employment Situation Report surprised investors by showing much stronger-than-anticipated numbers for the US labor market, softening the reading of weakness caused by the previous two months' reports.
Variation in total urban employment (000 of people) and unemployment rate (%) in the United States
Brazil: Historical and expectation for interest rates – Focus bulletin of August 28, 2026
In the domestic indicator agenda, investors are expected to react to the August reading of the Broad National Consumer Price Index (IPCA), which should help calibrate expectations for monetary policy management in the country.
Why this matters: A benign IPCA reading tends to consolidate expectations for the continuation of the Selic cut cycle, reducing the yields of domestic public bonds and the interest rate differential with the outside world, which could weaken the Brazilian real.
Copom should be more cautious: Since the last Monetary Policy Committee (Copom) meeting, monetary authorities have adopted a more neutral tone, stressing that they will depend on upcoming economic indicators to determine the next steps in monetary policy management.
Outlook: The median projection of the Focus Bulletin indicates that a Selic cut is likely at the next meeting, from 14.00% to 13.75% per year, but it may be the last one for the year.
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