Stock market and dollar fluctuate with an eye abroad and Copom’s decision

The Brazilian market opened on Wednesday, November 4th, with an eye on two factors: the scenario in the United States and the Copom decision. According to Revista Oeste, the Democratic Party won the American mid-term legislative elections, and the auction will have repercussions the day after the vote. At the end of this Wednesday afternoon, the Central Bank closes the Copom meeting, which will define the new Selic rate.

Regarding the exchange rate, the dollar fell against the real this Wednesday morning, according to the same publication. The movement takes place while the market oscillates with an eye abroad and the decision that the Copom is about to announce, which transforms the American currency into a thermometer of expectations in two fields at the same time.

On the stock market, Ibovespa, B3's main index, opened with an upward trend, after consecutive sessions in the red. The change of signal interrupts a sequence of recent losses and restores momentum to the shares at the beginning of trading.

The Copom is the Central Bank committee that defines the Selic rate, the basic interest rate for the Brazilian economy. When the rate rises, credit becomes more expensive and fixed income becomes more attractive; when it falls, the effect tends to be the opposite, and the stock market usually reacts to the change in the comparison between investment alternatives.

On the American side, the result of the mid-term legislative elections adds a variable to the scenario. As the US economy influences capital flows and risk appetite around the world, the American political scenario enters the radar of those who operate exchange and stock exchanges in Brazil.

What is at stake this Wednesday is the combination of these two vectors. With the Copom only announcing the decision at the end of the meeting, much of today's movement tends to reflect waiting, and investors need to separate the noise of the day from the trend that may be established after the announcement.

What changes for the investor

For those who invest and operate, the table calls for caution when reading. A possible increase in the Selic tends to make fixed income more competitive and weigh on risky assets, while a drop tends to produce the opposite effect. Regarding the exchange rate, the fall of the dollar against the real requires following both the Copom decision and the developments in the American result. This article does not provide a purchase or sale recommendation or price projections.

Automatically translated from Portuguese.