Bias: The USD/BRL outlook is range-bound as the current level is only slightly below the 90-day average and sits in the middle of the 3-month range.
Key drivers:
- Rate gap: The Federal Reserve is expected to implement one to two rate cuts in the coming months, while the Brazilian Central Bank maintains its Selic rate at 15%, creating a widening interest rate gap favoring the USD.
- Risk/commodities: Oil prices are currently above their 3-month average, which could support the BRL due to Brazil's status as a commodity exporter, making its currency more attractive during higher oil prices.
- Macro factor: Geopolitical tensions from recent U.S. airstrikes in Venezuela have the potential to create uncertainty, affecting the USD's strength.
Range: The USD/BRL is likely to drift within the recent 3-month range, reflecting ongoing fluctuations driven by economic and geopolitical factors.
What could change it:
- Upside risk: A stronger-than-expected economic recovery in the U.S. could lead to higher demand for the USD.
- Downside risk: Further inflation pressures in Brazil may prompt more aggressive monetary tightening, boosting the BRL.
