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BRAZIL: IPCA-15 Inflation Due, Spending Cut Plan To Be Presented This Week

BRAZIL
BulletEM BulletEmerging Market News
  • Finance Minister Haddad has said that the government’s spending cut plan will be presented this week, following a definitive meeting with President Lula on Monday. Haddad said that a constitutional amendment and a bill will be presented in Congress and that the government can use that amendment to include the spending cut plan. He added that the announcement of the plan is now a matter of protocol after a decision was made at the meeting yesterday.
  • BRL underperformed peers yesterday as the market awaited news of the fiscal plan. USDBRL closed little changed at 5.8111, with support to watch at 5.6763, the 50-day EMA and key resistance at 5.8750, the Nov 1 high. BBVA says that even if not perfect, having a plan in place could put a stronger ceiling on USDBRL and be a starting point for rebuilding fiscal credibility and reducing risk premia for Brazilian assets.
  • IPCA-15 inflation data cross at 1200GMT(0700ET), with the market expecting the headline rate to come in at 4.64% y/y in the first half of November. In m/m terms, prices are expected to rise by 0.50%, following a 0.54% gain previously. Earlier, FGV construction costs rose by a smaller-than-expected 0.44% m/m in November, after a 0.67% increase in October. Consensus was +0.56%.
    • Nov. IBGE Inflation IPCA-15 YoY, est. 4.64%, prior 4.47%
    • Nov. IBGE Inflation IPCA-15 MoM, est. 0.50%, prior 0.54%
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  • Finance Minister Haddad has said that the government’s spending cut plan will be presented this week, following a definitive meeting with President Lula on Monday. Haddad said that a constitutional amendment and a bill will be presented in Congress and that the government can use that amendment to include the spending cut plan. He added that the announcement of the plan is now a matter of protocol after a decision was made at the meeting yesterday.
  • BRL underperformed peers yesterday as the market awaited news of the fiscal plan. USDBRL closed little changed at 5.8111, with support to watch at 5.6763, the 50-day EMA and key resistance at 5.8750, the Nov 1 high. BBVA says that even if not perfect, having a plan in place could put a stronger ceiling on USDBRL and be a starting point for rebuilding fiscal credibility and reducing risk premia for Brazilian assets.
  • IPCA-15 inflation data cross at 1200GMT(0700ET), with the market expecting the headline rate to come in at 4.64% y/y in the first half of November. In m/m terms, prices are expected to rise by 0.50%, following a 0.54% gain previously. Earlier, FGV construction costs rose by a smaller-than-expected 0.44% m/m in November, after a 0.67% increase in October. Consensus was +0.56%.
    • Nov. IBGE Inflation IPCA-15 YoY, est. 4.64%, prior 4.47%
    • Nov. IBGE Inflation IPCA-15 MoM, est. 0.50%, prior 0.54%