The approval of the Pension Reform brought the resumption of the optimistic environment to the Brazilian economy, since now there is a new space for other reforms. The real surged again, with Bovespa reaching a new record and the market reducing its protection through dollars. The market even tested the level of BRL 4.00 a dollar. However, pessimism returned with the second instance issue that is being evaluated by the demoralized Brazilian Federal Supreme Court (STF). Legal uncertainty is back to a most delicate degree at this time, which affects foreign capital investment decision as laws become changeable depending on the distorted interpretation of the STF. This negative sentiment may be offset by new cuts in interest rates and more favorable economic data that emerged in the second half of this year. However, the country needs foreign investment, and legal certainty is a key point in this context. At the same time, the domestic corn market continued very firm last week, showing that the consumer sector did not observe the record flow of export shipments, maintaining its technically low stocks. Now, the number of potential exports for the year rises to 38.3 million tons, following the great result of October and the growing schedule for November.
A decisive October in some political and economic variables. At first, the Brexit framework is developing and already approved by the European Union. The timing of changes will have to be revised by the United Kingdom. The effect of the week’s decisions on this issue was the resumption of some appreciation of the dollar against other currencies. The dollar index even depreciated to 97 points, but rose again over the week to 97.60 points.
The trade war continues with its discussions perhaps a little more optimistic but still uncertain in its development. A definition of the so-called “phase 1” of a general agreement may occur in early November. Meanwhile, China continues to buy soybeans according to its needs and a lot of US pork.
In this last week of October some indicators may still affect the overall picture, either positively or negatively. The Fed will hold another meeting aimed at defining local monetary policy, with stabilization or new cut in interest rates. Owing to employment data, it seems that the Fed may again be unwilling to cut interest rates for the third time in a row. If it does, it will be within normal expectations. Without the cut, the market may take to December the chance of new cuts. Settlement in the global economy, if observed by the Fed, might confirm a new cut this October.