The USD to BRL exchange rate is currently bearish.
Key drivers include the interest rate differential, as the Federal Reserve plans several rate cuts by mid-2026, likely weakening the USD. The Brazilian Central Bank's Selic rate remains high at 15%, but potential cuts could begin in March 2026. This gap may support the BRL. Additionally, improving global economic growth and higher commodity prices could influence currency performance, particularly for the BRL, given its commodity-driven economy.
In terms of a near-term range, the USD to BRL is expected to trade within the current level, slightly above its three-month average.
Upside risks could arise from stronger-than-expected US consumer sentiment that boosts the USD. Conversely, downside risks include further deterioration in Brazil's fiscal health, impacting investor confidence in the BRL.
