Bias: Bearish-to-range-bound, EUR/BRL sits below its 90-day average and in the lower half of the three-month range.
Key drivers:
Rate gap: The ECB is set to hold policy steady in 2026, while Brazil’s Selic remains high, keeping BRL attractive on a carry basis versus the euro but limiting euro gains from improving data.
Oil: Oil near 60-day highs adds to Brazil's inflation risk and tends to weigh on BRL, particularly when risk appetite shifts, important for importers paying in BRL.
Macro: Eurozone inflation is easing, supporting a neutral ECB stance and limiting euro gains as growth remains modest.
Range: Expect EUR/BRL to drift within the three-month range, likely to test the lower end if risk appetite softens.
What could change it:
Upside risk: A hotter-than-expected eurozone inflation print or hawkish ECB signals could lift EUR versus BRL.
Downside risk: Brazilian inflation eases and policy easing prospects rise, boosting BRL and pushing EUR/BRL lower.
