The current market bias for the USD to BRL exchange rate is bearish.
Recent developments indicate that the US dollar is likely to weaken, primarily due to the Federal Reserve's plans for multiple rate cuts in 2026. The recent US inflation drop to 2.7% fuels expectations of more monetary easing, reinforcing the selling trend for the USD. Additionally, improving global economic conditions and rising commodity prices are expected to cause fluctuations in USD performance, which may induce further volatility.
In Brazil, the Central Bank has maintained its Selic rate at 15% but may consider cuts starting in March 2026, aimed at controlling inflation. However, ongoing fiscal challenges and political uncertainties regarding the upcoming presidential elections pose risks to the stability of the BRL.
The USD/BRL exchange rate is expected to trade in a range above its current level, given that it is currently 3.1% higher than its three-month average. Upside risks could stem from improved consumer sentiment in the US, while downside risks include continued fiscal challenges in Brazil affecting investor confidence.
