The US dollar closed at R$ 5.1743 on Wednesday, dropping 0.81% and reducing cost pressures on everyday consumer goods such as imported wheat and electronics. The greenback has dropped 5.73% since the start of the year, translating into roughly R$ 60 in savings on every thousand-real overseas purchase compared to last January. Meanwhile, the Ibovespa, Brazil's benchmark stock index, climbed 1.37% to 186,340 points, building a 15.65% year-to-date advance that comfortably outperforms standard Brazilian savings accounts.

Global sentiment improved after the release of the US Personal Consumption Expenditures price index, known as the PCE, which eased to a 3.4% annual rate in August compared to the expected 3.7%. The monthly increase stood at 0.3%, also below market expectations of 0.4%, according to data compiled by G1 citing Reuters.

Understanding the PCE Index

Understand: The PCE measures what American households spend on daily goods and services, acting as the primary gauge used by the US Federal Reserve, the central bank of the United States, to steer interest rates. When price increases slow in Washington, policymakers face less urgency to keep borrowing costs elevated, which encourages international investors to move capital toward higher-yielding emerging economies like Brazil.

Domestically, market participants evaluated Brazilian Central Bank data showing a primary budget deficit of R$ 10 billion in August, representing the gap between government spending and revenue before debt interest payments. Investors also tracked political developments ahead of presidential elections, following a Quaest poll placing President Luiz Inacio Lula da Silva at 39% of voter intentions against Flavio Bolsonaro at 34% in the first round.

Wall Street closed mixed, with the Dow Jones sliding 0.86% and the tech-heavy Nasdaq gaining 0.24%. In Sao Paulo, the positive international momentum dominated trading and supported Brazilian assets.