Dollar retreats on tax reform and international optimism; Bag goes up – Young Pan

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Exchange rate drops to R$5.17 with expectations for a preliminary report in Congress and the start of the corporate balance sheet season; Ibovespa advances 1.73%

Rick Wilking/ReutersDollar retreats this week in anticipation of tax reform and positive scenario abroad

The main indicators of financial market Brazil closed in the positive field this Monday, 12, with the expectation of the presentation of the preliminary report of the tax reform and the start of the corporate balance sheet season. O dollar ended with a retreat of 1.25%, quoted at R$ 5.174. This was the biggest drop since June 1, when the currency retreated 1.51%. The exchange opened the day at a strong high and reached a maximum of R$5.285, while the minimum was R$5.164. The US currency closed on Friday, 9th, with a drop of 0.30%, to R$ 5.239. Following the international good mood, the Ibovespa, a reference on the Brazilian Stock Exchange, closed with an increase of 1.73%, at 127,593 points. It was the biggest daily jump since May 7, when the session advanced 1.77%. The main indicator of the Stock Exchange ended on Thursday, 8, with a retreat of 1.25%, at 125,427 points.

Global markets have somewhat brushed aside concerns about the spread of the Delta variant of new coronavirus to focus on the disclosure of corporate balance sheets for the second quarter. In the domestic scenario, attention is divided in the presentation of the preliminary report of the tax reform, scheduled for this Tuesday, 13. The rapporteur, deputy Celso Sabino (PSDB-PA) did not reveal the changes, but the expectation is for a downward revision 20% tax on dividends recommended by the Ministry of Economy. Chamber president Arthur Lira (PP-AL) stated that the text should reduce the tax burden by R$ 50 billion. Investors also analyze the deterioration of the political scenario with the turmoil in Brasília. The Covid-19 Parliamentary Inquiry Commission (CPI) continues this week with the expectation of being extended for another 90 days, until October. The extension of the work reached the necessary signatures and depends on the reading of the request by the president of the Senate, Rodrigo Pacheco (DEM-MG). In the course of the investigations, the Federal police launched an inquiry this Monday to investigate suspected malfeasance by the president Jair Bolsonaro in case of purchase of vaccine Covaxin against a Covid-19.

Still on the domestic agenda, the financial market once again raised forecasts for inflation, Gross Domestic Product (GDP), dollar and Selic for 2021. According to data from the Focus Bulletin, the expectation for the Broad Consumer Price Index (IPCA) was 6.11%. The interest rate, the Central Bank’s main tool to control inflation, was revised to 6.63%. For 2022, estimates point to an increase of 7%. The outlook for economic growth was also revised upwards, going to 5.26%, while the exchange rate projection was changed with a slight increase, to R$ 5.05.