Bias: The outlook for BRL/USD is bullish-to-range-bound as the pair is currently above the 90-day average and in the upper half of the 3-month range.
Key drivers:
- Rate gap: The Brazilian Central Bank has maintained high interest rates at 15%, while the Federal Reserve may consider cutting rates, supporting the BRL against a potentially weaker USD.
- Risk/commodities: Oil prices remain volatile, which can affect Brazil’s export revenues and, consequently, the BRL’s performance relative to the USD.
- Inflation outlook: Ongoing inflation in Brazil could prompt further tightening from the Central Bank, creating upward pressure on the BRL.
Range: The BRL/USD is likely to hold within its recent range, with potential for slight upward drift as long as domestic inflationary pressures persist.
What could change it:
- Upside risk: A stronger than expected recovery in Brazilian economic indicators could strengthen the BRL further.
- Downside risk: Any aggressive actions by the US regarding tariffs or geopolitical tensions could negatively impact the BRL.
