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BRAZIL: August Retail Sales Due At 1300BST

BRAZIL
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  • Local assets underperformed yesterday amid the pullback in commodity prices and rise in IPCA inflation in September, with USDBRL rising 1.07% to 5.5935 and DI swap rates up by than 25bp in much of the curve. USDBRL tested initial resistance at 5.5971, the Sep 23 high, above which next resistance is seen at 5.6917, the Aug 30 high and a bull trigger.
  • BBVA believes that the data are likely to keep the BCB on track with its hiking cycle. However, the hikes are unlikely to be sufficient for a more meaningful recovery in the BRL in their view, as this would require more meaningful progress on the fiscal front. Nonetheless, the levels in USDBRL are nearing a point where they could consider excessive risk premium built in and thus consider short USDBRL trade ideas.
  • Today, retail sales are expected to fall by 0.6% m/m in August, following a 0.6% gain the month before (1300BST/0800ET). In annual terms, sales growth is expected to edge down to 4.2% y/y, from 4.4%.
    • Aug. Retail Sales MoM, est. -0.6%, prior 0.6%
    • Aug. Retail Sales YoY, est. 4.2%, prior 4.4%
    • Aug. Retail Sales Broad MoM, est. 0.3%, prior 0.1%
    • Aug. Retail Sales Broad YoY, est. 4.4%, prior 7.2%
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  • Local assets underperformed yesterday amid the pullback in commodity prices and rise in IPCA inflation in September, with USDBRL rising 1.07% to 5.5935 and DI swap rates up by than 25bp in much of the curve. USDBRL tested initial resistance at 5.5971, the Sep 23 high, above which next resistance is seen at 5.6917, the Aug 30 high and a bull trigger.
  • BBVA believes that the data are likely to keep the BCB on track with its hiking cycle. However, the hikes are unlikely to be sufficient for a more meaningful recovery in the BRL in their view, as this would require more meaningful progress on the fiscal front. Nonetheless, the levels in USDBRL are nearing a point where they could consider excessive risk premium built in and thus consider short USDBRL trade ideas.
  • Today, retail sales are expected to fall by 0.6% m/m in August, following a 0.6% gain the month before (1300BST/0800ET). In annual terms, sales growth is expected to edge down to 4.2% y/y, from 4.4%.
    • Aug. Retail Sales MoM, est. -0.6%, prior 0.6%
    • Aug. Retail Sales YoY, est. 4.2%, prior 4.4%
    • Aug. Retail Sales Broad MoM, est. 0.3%, prior 0.1%
    • Aug. Retail Sales Broad YoY, est. 4.4%, prior 7.2%