USD/BRL Outlook:
The USD/BRL exchange rate is likely to decrease as it is currently well below its 90-day average and near recent lows, pressured by external factors and local economic conditions.
Key drivers:
• Rate gap: The Brazilian Central Bank has kept its interest rates steady at a high level, while rate expectations in the U.S. have been adjusted to reflect a potential easing.
• Risk/commodities: With oil prices significantly above their recent averages, Brazil's economy could feel the impact of lower export revenues, affecting the BRL negatively.
• One macro factor: Adjustments to the Bolsa Família budget may hamper consumer spending, raising concerns over Brazil's economic growth.
Range:
The USD/BRL is likely to hold around its recent lows but may drift slightly lower within its volatile range seen over the past three months.
What could change it:
• Upside risk: A surprising uptick in U.S. job figures could strengthen the USD against the BRL.
• Downside risk: Additional cuts in Brazil's fiscal programs could further weaken the BRL economy and its currency.
