Barclays Take Profit On USD/BRL Option Recommendation

Barclays take profit on their USDBRL 1x2 call spread trade recommendation.

They write that uncertainty about Brazil's fiscal outlook has increased over the past month and thereby take profit on their USDBRL 1x2 call spread and open a new call spread in response. They add that the possibility of extending COVID-related spending and discussions ahead of the 2021 budget have now arisen, and that the market remains sensitive to any potential increases in expenditure that could threaten the spending cap, or any proposal that could directly bypass it.

This was confirmed by the BRL and local rates/equities sell-off last week after the Senate surprisingly overturned a presidential veto that prohibited wage increases to civil servants and the military for 18 months.