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BRAZIL: Risk off Sentiment Keeps USDBRL on Front Foot

BRAZIL
  • Poorer sentiment in equity markets has kept the Brazilian real on the back foot during today’s session. USDBRL has risen 0.70% on Wednesday, broadly in line with regional peers. Traders received mixed signals from President Lula on Tuesday, who said he was serious about the fiscal issue, but also stated he is not obligated to meet fiscal targets. While concerns linger, Finance Minister Haddad took the opportunity to say that the government can implement a blockade and contingency to ensure compliance with this year's fiscal target.
  • Overall, the most recent USDBRL pullback still appears to be a correction. The 50-day EMA, the next support, lies at 5.3554 and a clear break of this average would be needed to highlight a potential reversal.
  • Recapping BCB Galipolo’s comments on Tuesday, the director said Brazil's central bank has all options on the table regarding future interest rate decisions, due to the fact uncertainty has increased. Galipolo stressed, when asked what could lead the bank to resume rate cuts, that policymakers are not providing any guidance in a more challenging environment marked by a stronger labor market and pressure on the Brazilian real.

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