EUR/BRL Outlook:
The outlook for EUR/BRL is likely to decrease as it is currently trading below its recent average and near recent lows. Increased global risk aversion and current pressures on the Brazilian economy contribute to this trend.
Key drivers:
• Rate gap: The European Central Bank (ECB) is on hold, while Brazil's Central Bank maintains high rates, limiting the appeal of the BRL.
• Risk/commodities: Rising oil prices are strengthening the euro, but Brazil's export exposure to declining commodity prices, such as iron ore, weighs on the BRL.
• One macro factor: Recent cuts to Brazil's Bolsa Família program may impact consumer spending, further straining the economy.
Range:
EUR/BRL is likely to drift within its recent 3-month range following volatility.
What could change it:
• Upside risk: A resolution in geopolitical tensions could boost investor confidence in Brazil.
• Downside risk: Weak economic data from Brazil could pressure the BRL further.