Bias: Bearish-to-range-bound, as the current level is below the 90-day average and in the lower half of the 3-month range.
Key drivers:
- Rate gap: The Federal Reserve is expected to cut rates soon, while the Central Bank of Brazil has kept its high interest rate to combat inflation, creating differing monetary policies that favor the USD.
- Risk/commodities: Recent oil prices have increased, which could support the BRL, as Brazil is a key oil producer and benefits from higher oil values.
- Fiscal measures: The Brazilian government's stimulus actions raise concerns about inflation and their effectiveness, potentially weakening the BRL.
Range: The USD/BRL pair is likely to drift within its recent range, with fluctuations influenced by domestic and international factors.
What could change it:
- Upside risk: A significant improvement in US economic indicators could drive the USD higher.
- Downside risk: Further inflation pressures in Brazil prompting tighter monetary measures could strengthen the BRL.
