March 28 (Reuters) - Brazil's real slipped to a near one-week low against a muted dollar in thin trading volume, dragging the Latin American currencies index, while investors awaited a key U.S. inflation test for more clues on the Federal Reserve's policy outlook.
- Brazil’s jobless rate ticks up but labor market remains strong
- Chile’s copper output up 10% in Feb
The MSCI index tracking Latam currencies fell 0.2%, on track for only slight gains this quarter, losing steam following the previous quarter’s near 6% jump, with the dollar index set for a strong quarterly advance, owing to doubts over U.S. rate cuts this year.
“Some Fed members believe that rate cuts can be delayed and that perhaps only two are needed. This puts renewed downward pressure on all Latam and EM which now face a bit of central bank policy divergence after committing to slashing borrowing costs,” said Juan Perez, director of trading at Monex USA.
All eyes will be on the Fed’s preferred inflation gauge, the so-called core personal consumption expenditures (PCE) price index data, due on Friday.
Any negative surprises could further blur the U.S. rate cuts picture. Meanwhile, the stocks gauge was set for a quarterly decline, after a near 16% jump in the previous one. Equity markets in Mexico, Argentina, Colombia, Peru will be shut during the day owing to a public holiday, while Chile will be partially closed.
While all Latam markets will be shut on Friday due to Good Friday, Argentine markets will remain inactive until Tuesday. On the data front, Brazil’s jobless rate ticked up in the three months through February but the largest Latam economy’s labor market remains resilient, with unemployment still close to lowest levels since 2015.
Policymakers have been concerned that labor market strength could feed into higher inflation and hinder monetary easing cycle.
“We expect the hot labor market backdrop to stabilize in coming quarters,” Goldman Sachs analysts wrote.
The country’s central bank revised up its economic growth projection for this year to 1.9%, from the 1.7% seen in December, which Finance Minister Fernando Haddad on Wednesday had said could be revised to above 2.5%. Brazil’s real slipped 0.1% against the dollar, while Chile’s peso and Mexico’s peso shed 0.3% and 0.1%.
Data showed Chile’s unemployment rate rose to 8.5% in the quarter through February, below estimates.
Top copper producer Chile’s output of the red metal grew 9.95% year-on-year in February. Manufacturing production rose 8.8 annually, overshooting estimates.
