EUR/BRL Outlook:
The EUR/BRL is bearish, trading significantly below its recent average and at 7-day lows. Current factors suggest continued pressure on the Brazilian Real against the Euro, despite some geopolitical support for the Euro.
Key drivers:
• Rate gap: The European Central Bank (ECB) maintains a cautious stance, while Brazil's Central Bank has kept interest rates high with limited room for easing, impacting the real's performance.
• Risk/commodities: Oil prices are at recent highs, which generally supports the Brazilian economy but may negatively influence the real due to increased import costs.
• One macro factor: Brazil’s political uncertainty ahead of the 2026 elections has increased the risk premium on the real, contributing to its depreciation.
Range:
The EUR/BRL is likely to drift within its recent range, characterized by high volatility but generally lower trading levels.
What could change it:
• Upside risk: Stabilization in Brazil's political landscape could boost the real.
• Downside risk: Further strengthening of the US dollar could exert more downward pressure on the real, leading to greater losses.
