EUR/BRL Outlook: Slightly positive, but likely to move sideways, as the rate is just below the 90-day average, with limited momentum for a strong shift.
Key drivers:
• Rate gap: The European Central Bank is keeping interest rates steady, while Brazil's Central Bank maintains a high Selic rate but is expected to begin easing later this year, creating a disparity that may support the BRL in the long run.
• Risk/commodities: The significant rise in oil prices could bolster the BRL, as Brazil is a key oil producer, but ongoing volatility might create uncertainty for the currency.
• One macro factor: Political uncertainties in Brazil, particularly concerning upcoming elections, have increased volatility in the BRL, making it sensitive to domestic conditions.
Range: EUR/BRL is likely to drift within its recent 3-month range, with limited movement outside the current thresholds.
What could change it:
• Upside risk: Strong economic growth data from the Eurozone could stimulate demand for the euro.
• Downside risk: Continued political instability in Brazil, especially with election speculation, could pressure the BRL further.
