CAD/BRL Outlook:
The CAD/BRL pair is likely to decrease as it currently trades near 90-day lows and is significantly below its recent average. This movement is further supported by recent commodity price pressures impacting the Canadian dollar.
Key drivers:
- Rate gap: The Bank of Canada maintains a higher overnight policy rate than the Central Bank of Brazil, creating a disadvantage for the BRL as capital flows favor the CAD.
- Risk/commodities: Oil prices are currently strong, trading well above the recent average. This conditions the CAD positively despite its current weakness against the BRL.
- Macro factor: Brazil's government is cutting its Bolsa Família budget, which could slow consumer spending and negatively impact the BRL's strength.
Range:
Expect the CAD/BRL to hold near current levels or drift lower as volatility remains in play.
What could change it:
- Upside risk: A significant rise in oil prices could strengthen the CAD if global demand increases.
- Downside risk: Any indication of economic stagnation in Brazil could worsen the BRL's performance, pressuring the CAD/BRL pair further.