USD/BRL Outlook: Slightly weaker, but likely to move sideways, as the rate is below its recent average and near recent lows, without a clear driver for movement.
Key drivers:
• Rate gap: The Federal Reserve's potential rate cuts could weaken the USD, while Brazil's Selic rate remains high, supporting the BRL.
• Risk/commodities: Oil prices are above their average, which could positively affect the BRL as it is a key commodity for Brazil.
• One macro factor: Persistent inflation in Brazil is likely to keep the Central Bank on a cautious tightening path, which may bolster the BRL.
Range: The USD/BRL is expected to drift within its recent range, possibly holding around the current levels due to mixed signals.
What could change it:
• Upside risk: A significant delay in Fed rate cuts could strengthen the USD against the BRL.
• Downside risk: Continued concerns over Brazil's fiscal measures leading to higher inflation might pressure the BRL further.
