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  • The Brazilian Real continued its recovery from the 5.30 level, amid a sharp recovery in oil markets and broader risk sentiment. Despite the rally, upside may be capped by lingering political issues, outlined below. Some trading desks reported a quiet session that saw little bias to flows in any direction.
  • The focus will be on the IPCA-15 inflation data due on Friday which will be the final print before the Aug 4 Copom meeting/decision. The annual reading is expected to jump to 8.51% from 8.13% previously.
  • President Bolsonaro removed one of his closest ministers from office on Wednesday, in order to hand the chief-of-staff role to one of the main leaders of the so-called "Centrão," or Big Center, a cluster of centre-right parties.
    • Senator Ciro Nogueira (Progressive Party, PP, of Piauí) is expected to take over the position currently occupied by retired Army General Luiz Eduardo Ramos, Mr. Bolsonaro's long time friend, in the coming days.
    • The changes take place at a difficult time for Mr. Bolsonaro, with polls showing a sharp drop in his approval rating.
    • Government allies believe that Bolsonaro needs to consider the gesture, especially now that he is facing scrutiny from a senate probe into the government's response to the pandemic.