Bias: range-bound, current CAD/BRL sits near the 3-month average and in the middle of the 3-month range, with no clear signal from the 90-day average.
Key drivers:
- Rate gap: the Bank of Canada has eased to a low policy rate while Brazil’s policy stays relatively tight, keeping BRL more resilient against CAD.
- Oil: oil prices are trading near 90-day highs, reinforcing CAD via Canada’s commodity link and adding a driver for modest BRL moves on risk appetite.
- Macro: Brazilian inflation remains above target, keeping policy tight and BRL sensitive to incoming data.
Range: CAD/BRL is likely to drift within its 3-month range, with occasional tests of the upper edge if oil stays firm.
What could change it:
- Upside risk: sustained oil strength and better-than-expected Canadian data lifting CAD.
- Downside risk: inflation surprises in Brazil or a shift in US trade policy weighing on CAD and fueling BRL gains.