USD/BRL Outlook: Bearish, as the rate is below its recent average and near recent lows due to tariff concerns impacting the US dollar.
Key drivers:
- Rate gap: The Federal Reserve is expected to cut rates, while the Brazilian Central Bank maintains high rates, creating a widening gap that benefits the BRL.
- Risk/commodities: Oil prices are rising, which typically supports the BRL as Brazil is an oil exporter, putting further pressure on the USD.
- One macro factor: Ongoing tariff disputes between the US and Brazil are creating uncertainty and affecting investor confidence, contributing to the US dollar's weakness.
Range: The USD/BRL is likely to drift lower within its 3-month range as pressures from tariffs and domestic policies unfold.
What could change it:
- Upside risk: A sudden resolution to the US-Brazil tariff disputes could strengthen the USD.
- Downside risk: Continued increases in oil prices or further escalation of geopolitical tensions could weaken the USD against the BRL.
