What investors can expect from 'Super Week' with Copom and the tariff time bomb

It would already be an important week with the traditional "Super Wednesday," which occurs when both the Brazilian Central Bank and the Fed, the US central bank, announce new interest rates that guide the economies of both countries. But the final days of July promise plenty of excitement and tension, which in the financial market translates into a single behavior: volatility. After all, it's not every day, or every week, that the United States can effectively tax Brazilian exports by 50%. Everything changes, of course, if there's a positive outcome to the trade war between the two countries. But that's no longer a plausible alternative for the market at this point, drifting more toward the realm of hoping something happens.

"This is a very important week for the market; there could be volatility," says C6 Bank's head of treasury.

However, expectations regarding the decision on Brazil's benchmark interest rate, the Selic, appear to be unanimous. The Monetary Policy Committee (Copom) meets starting Tuesday. Bradesco expects it to remain unchanged, as indicated by the committee itself at the previous meeting, which set the rate at 15% per year. Itaú is following the same path, whose analysis of the Selic already considers a highly uncertain external scenario. In other words: the threat of a tariff hike. For Itaú, the rate remains at 15%, ending the monetary tightening cycle that began in September 2024. The decision, according to the bank, should reflect the "assessment that, despite inflation projections still above the target, the lagged effects of monetary policy remain ongoing, while high global uncertainty demands additional caution."

In the case of the Fed, expectations also revolve around maintaining the current rate, which is in the range of 4.25% to 4.5% per year. If this occurs, it will once again be a decision by Fed Chairman Jerome Powell, which displeases US President Donald Trump. The White House president has publicly called for a rate cut. In other words, if expectations are confirmed and the rate "stagnates," further statements from Trump on the matter could add a new layer of volatility. Finally, a 15% interest rate in Brazil means that fixed-income products can continue to offer ordinary investors good returns with reduced risk, especially when compared to equities.

Back to the North American tariff

While no agreement is on the horizon between Brazil and the United States, Democrats accuse Trump of abuse of power due to the tariff hike, and the White House is seeking a new legal basis to justify the 50% tariff increase. "The most anticipated event of the week will be the implementation of trade tariffs," summarizes Sara Paixão, macroeconomic analyst at InvestSmart. "We're likely to see greater fluctuations, especially in stocks in sectors exposed to the North American market, such as steel, agribusiness, pulp and paper, and automotive," says Otávio Araújo, senior consultant at Zero Markets Brasil. He believes it wouldn't be surprising for investors to take profits in the stock market as well. And in the case of fixed income, with long-term government bonds paying between 13.8% and 14% per year, there's no need to worry. "The big concern right now isn't the Copom meeting, but rather the US tariff hike," concludes Karine Damiati, partner at AVG Capital.

The volatile mood of this decisive week is likely to cause the stock market to once again remain stagnant at current levels. The Ibovespa, which began the year hovering around 120,000 points, experienced significant appreciation in the first half of the year, reaching 141,000 points. However, with the last two weeks of difficult trading sessions, the stock market is hovering around 133,000 points—far from the symbolic 150,000-point mark projected by many market participants for the end of 2025.

It's also an important earnings week, with a significant number of companies releasing their second-quarter results. This performance could impact stocks on the same stock exchange. And the week also features data releases from Santander, Bradesco, and Vale. That's no small feat.

Pressure on the dollar

Speaking earlier last week with VEJA NEGÓCIOS, William Castro Alves, chief strategist and partner at Avenue, said that the trade crisis could impact the real. Castro Alves believes the Brazilian currency is a risky asset for investors, and this uncertainty regarding tariffs isn't good for anything. "The real is the first currency to feel the pressure, the first asset to feel it. Consequently, you could expect more pressure if we don't see any change on the tariff issue."