The Brazilian real weakened to around 5.205 per USD, nearing the one-month low of 5.21 touched on August 14, as a more restrictive policy signal from Fed Chair Warsh supported the US dollar. Warsh said the Fed is tracking the PCE index as its inflation gauge, using firmer rhetoric than earlier suggestions that a newly created task force could shift the central bank’s preferred measure. Rate futures subsequently shifted toward pricing a potential Fed rate hike next month. Meanwhile, Brazil created 58,568 formal jobs in July, well below forecasts of 112,000 and down sharply from 145,161 in June. Inflation eased to 4.25% in the first half of August, below the BCB’s 4.5% upper tolerance band. Softer labor and inflation data could allow the BCB to continue its 25-basis-point easing cycle. A Fed hike and a BCB cut would narrow the rate differential and reduce the appeal of Brazilian assets. However, unemployment fell to 5.3% in the rolling quarter through July, its lowest level since 2025.