GBP/BRL Outlook: Slightly positive, but likely to move sideways, as the rate is just above its recent average with no clear driving force.
Key drivers:
• Rate gap: The Bank of England's cautious approach to rate cuts contrasts with Brazil's steady Selic rate, creating a divergence that supports the GBP.
• Risk/commodities: With oil prices recently near 90-day highs, Brazil's economy could face pressure due to its reliance on commodity exports, impacting the BRL negatively.
• One macro factor: The imposition of US tariffs on Brazilian goods continues to strain trade relations and could dampen the BRL's performance despite limited repercussions for the GBP.
Range: The GBP/BRL is likely to hold within its recent 3-month range as both currencies react to their domestic and international challenges.
What could change it:
• Upside risk: Stronger economic data from the UK could lead to increased confidence in the GBP.
• Downside risk: Renewed tensions in US-Brazil trade relations may exert downward pressure on the BRL, affecting the GBP/BRL rate.
