USD/BRL Outlook:
Bearish, as the rate is below its recent average and near recent lows.
Key drivers:
• Rate gap: The Federal Reserve's decision to hold interest rates steady contrasts with Brazil’s commitment to maintain its SELIC rate, potentially hindering the BRL's relative strength.
• Risk/commodities: Oil prices are above average, which can support Brazil’s export revenues and bolster the BRL, yet recent USD strength indicates mixed effects.
• One macro factor: Geopolitical tensions over trade policies are leading to reduced confidence in the USD, affecting its value adversely.
Range:
Expect the USD/BRL to drift within its recent range, testing the lower limits amid ongoing pressures.
What could change it:
• Upside risk: A significant rise in oil prices could enhance Brazil's trade balance, supporting the BRL.
• Downside risk: Further escalations in geopolitical tensions could exacerbate the USD's decline, impacting the BRL negatively.