June 25, 2022
The dollar is moving in line with expectations that interest rates will rise in the US - Petro Lopado

The dollar is moving in line with expectations that interest rates will rise in the US – Petro Lopado

The US currency quote feels the consequences of actions taken to combat the acceleration of prices in the world (Photo: Fernando Carvalho / General Photos 11/11/16)

Used less than Brazilians to live with high inflation, Americans have been suffering from what they have not seen for 40 years: the Consumer Price Index (PCI) has already reached 8.5% a year. According to them, this is a significant loss of purchasing power, forcing most households to reduce their domestic budgets, which has a negative impact on companies.

As in every country, the entertainment industry is generally one of the most affected by these cuts, and this time around, it provides an example of better visibility. Along with the increase in competition in the streaming market and the decrease in the money supply in the United States, among the reasons for the losses caused by the powerful Netflix are inflation and measures to combat it.

The company announced last week that it would lose 2 million subscribers in the coming months, confirming the trend of the previous quarter. The impact on the competitive U.S. stock market was immediate: Netflix, the reigning champions, had already lost nearly 40%, and could fall further.

According to the Financial Times, an accredited British economic daily, many US subscribers have reacted badly to the company’s recent price hike as consumers face the country’s highest inflation in decades.

According to the FT, this is not the only damage inflicted on Netflix’s business by inflation, a company that has benefited from a loose US monetary policy. Due to the need to combat inflation, the Federal Reserve (US Federal Reserve) abandoned its long-term recession and reversed monetary policy.

Power began by suspending the program of paying cash flow into the economy and is now beginning to raise the base interest rate. The first move had a major impact on the local economy; After all, $ 20 billion in bonuses were repurchased every month, which had a positive impact on lending.

Launched in 2007, Netflix has revolutionized the television and movie market. But since 2012, when he started producing his own content, he gained a global streaming market. To this end, the company decided to invest more, making products that require a larger budget.

The monetary policy of feeding cash flow in the United States, no doubt, was of great help to companies betting on their own growth, such as Netflix. Added to the low interest rate at that time (less than 0.5% per annum), this policy has led investors in the world’s largest financial markets to seek returns on stocks, including Netflix, which is now feeling the effects. The expectation that those who were creative to revolutionize their market and achieve global success will know how to rediscover their business.

High interest

In terms of interest rates, the tightening of US monetary policy had a temporary start in March. The allowable increase last month was only 25 basis points or 0.25%. This is nothing compared to the pace of inflation, which, by then, was already approaching 6% per annum and continued to rise.

This is good for our long-suffering national currency, which was highly appreciated against the dollar due to the difference in interest rates; After all, ours has already reached 11.75% for the year. It is clear that large American investors will not miss this opportunity: they poured money into the Brazilian fixed income and stock markets. With so many dollars coming in, the actual year-over-year increase was 14.85% from March 25th.

Everyone knows that this will only be for a short time, so the market is monitoring the signals that members of the US Monetary Policy Committee usually give before meetings. A 0.50% interest rate hike is expected at next week’s meeting, but the market expects some more.

In fact, the impact of inflation on American society led members of the Monetary Commission to defend themselves against the acceleration of interest rate hikes as the factors contributing to the current wave of inflation in the world persist. Disruptions caused by locks during a health crisis have not yet been overcome. Moreover, Russia’s war with Ukraine has already reached its third month without a solution.

Anticipation

Therefore, there are plenty of reasons to expect a strong tightening of the country’s monetary policy in issuing dollars, which could have negative consequences for the rest of the world. In the midst of this anticipation, any spark can ignite. That is what happened last Friday, when the rushing dollar in many countries caused a market surprise.

On that day alone, the US currency jumped against the real currency, rising to R $ 4.80. Yesterday, the market opened again with tension, the dollar was valued at R $ 4.88. This new rise in the dollar could cause the US currency to return to the level of quotes above R $ 5 sooner than expected, or it could be another false alarm. In doubt, the old adage that if inflation paralyzes, the exchange will kill applies. Can’t catch you.