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BRAZILIAN REAL: After showing above the 4.00 handle Thursday, USD/BRL closed
back below the mark yesterday and BRL extends modest gains so far Friday with
the US GDP number helping push prices lower. Following the decision earlier in
the week from the Brazilian lower house (effectively giving the pensions reform
bill the greenlight to progress to Congress), little progress is expected Friday
with the political calendar now quiet until May 7th, when the first session of
debate begins in the Lower House.
-This has seen USD/BRL implied vols retreat slightly, although short-end vols
remain higher on the week. Risk reversals, however, have barely budged, with
markets needing a more firm commitment from Brazilian lawmakers on pensions
reform before the 1m measure can revisit recent cycle lows printed in March.
-Worth recalling, however, that JPMorgan earlier this week stated they see BRL
upside hampered by weak domestic growth prospects regardless of the pension bill