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BRAZIL: Lower House Approves Bill To Unwind Payroll Tax Cuts

BRAZIL
EM BulletBulletGlobalEmerging Market NewsRegion
  • Yesterday, the lower house of Congress approved the bill that will gradually unwind payroll tax cuts over a three-year period for 17 sectors of the economy. The bill also proposes charging municipalities with up to 156,000 inhabitants the full pension tax rate from next year. In a local radio interview today, Finance Minister Haddad said that the revenues for the payroll tax relief this year have been resolved.
  • Following these developments and with commodities rallying, USDBRL is ~0.2% lower on the day around 5.65. Bullish conditions in USDBRL remain intact, however, with attention on 5.7422, the 76.4% retracement of the Aug 5 - 19 downleg. Clearance of this level would expose 5.8551, the Aug 5 high and the bull trigger. Firm support to watch is 5.5416, the 50-day EMA.
  • Meanwhile, DI swap rates are around 8bp higher today, ahead of next week’s Copom meeting, when a 25bp Selic rate hike is expected. Brazil economic activity data are due tomorrow, one of the final key releases ahead of that meeting.
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  • Yesterday, the lower house of Congress approved the bill that will gradually unwind payroll tax cuts over a three-year period for 17 sectors of the economy. The bill also proposes charging municipalities with up to 156,000 inhabitants the full pension tax rate from next year. In a local radio interview today, Finance Minister Haddad said that the revenues for the payroll tax relief this year have been resolved.
  • Following these developments and with commodities rallying, USDBRL is ~0.2% lower on the day around 5.65. Bullish conditions in USDBRL remain intact, however, with attention on 5.7422, the 76.4% retracement of the Aug 5 - 19 downleg. Clearance of this level would expose 5.8551, the Aug 5 high and the bull trigger. Firm support to watch is 5.5416, the 50-day EMA.
  • Meanwhile, DI swap rates are around 8bp higher today, ahead of next week’s Copom meeting, when a 25bp Selic rate hike is expected. Brazil economic activity data are due tomorrow, one of the final key releases ahead of that meeting.