FX.co ★ Brazilian Real Eases After Unemployment

The Brazilian real has slipped past the 5.6 mark against the USD, retreating from its peak of 5.62 observed in October 2024, as of April 29th. This decline comes as investors absorb the latest labor market data amidst ongoing trade war tensions. Brazil's unemployment rate has climbed to 7.0% in the first quarter, marking its highest level since May 2024. This increase reflects a labor market grappling with high borrowing costs and the persistent uncertainty in trade, prompting the central bank to reconsider any further monetary tightening. Concurrently, renewed concerns over trade disputes between Washington and Beijing pose a threat to Brazil's commodity export demand. Additionally, the weakening prices of oil and iron ore are diminishing the currency's historical advantage in terms of trade. On the international front, the unexpected 0.3% annualized contraction of U.S. GDP in the first quarter, along with a sharp drop in ADP payrolls to just 62,000 jobs in April, has spurred a flight to U.S. assets perceived as safe-havens, even as the Federal Reserve indicates potential future rate cuts.