GBP/BRL Outlook:
Slightly weaker, but likely to move sideways given that the rate is below its 90-day average and near recent lows without a clear driver.
Key drivers:
• Rate gap: The Bank of England is adopting a cautious monetary policy, maintaining steady rates, while the Central Bank of Brazil has kept its high SELIC rate to balance inflation and growth.
• Risk/commodities: Recently, oil prices have been strong, trading significantly above the average, which can boost the BRL given Brazil's oil exports.
• One macro factor: Ongoing political uncertainty in the UK and mixed economic indicators have hampered GBP strength, impacting its appeal against a more stable BRL.
Range:
The GBP/BRL is likely to drift within its recent range as underlying factors remain mixed.
What could change it:
• Upside risk: A surprise improvement in UK GDP could strengthen the GBP.
• Downside risk: Continued strength in the US dollar and global market risks might further weaken the GBP relative to the BRL.
