The Brazilian real weakened to around 5.205 per dollar, approaching the one-month low of 5.21 reached on August 14, as a more restrictive policy signal from Fed Chair Warsh strengthened the U.S. currency. Warsh said the Federal Reserve is tracking the PCE index as its inflation gauge, using firmer language than earlier suggestions that a newly created task force could change the central bank’s preferred measure. Rate futures subsequently shifted toward pricing a potential Fed rate hike next month. Brazil created 58,568 formal jobs in July, well below forecasts of 112,000 and sharply lower than June’s 145,161. Inflation eased to 4.25% in the first half of August, below the BCB’s 4.5% upper tolerance band, potentially giving the central bank room to continue its cycle of 25-basis-point cuts. A Fed hike alongside a BCB cut would narrow the interest-rate differential and reduce the appeal of Brazilian assets. At the same time, unemployment fell to 5.3% in the rolling quarter through July, its lowest level since 2025.