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Brazilian Real Rises 2.3%, Reverses Last Week’s Decline

LATAM
  • BRL is rising 2.3%, even though sentiment across emerging-market currencies has been mixed this session and broad USD weakness has been limited across the currency space ahead of Wednesday’s FOMC decision. Gains in oil and metals has bolstered the supportive real price action, as have inflows to local equities. The Ibovespa is up 1.5% on Monday.
  • An additional positive factor for the Real’s rally on Monday stemmed from a headline from special secretary for the Treasury and Budget, Esteves Colnago, who said the spending cap still plays an important role fiscally.
  • Downside adjustments to 2022 inflation forecasts within the latest BCB survey may have also been welcoming news for investors, however, the increase to year-end 2023 reading, from 5.2 to 5.3% continues to indicate the deterioration of medium-term expectations.
  • Tomorrow’s key regional data release will be the mid-month IPCA inflation data from Brazil, where the annual headline rate is expected to fall to 11.41% from a prior reading of 12.04%. Data is due at 1300BST/0800ET.
  • Below gives key levels of LatAm markets in current trade:
    • USDMXN down 0.42% at 20.4422
    • USDBRL down 2.26% at 5.3734
    • USDCLP down 1.96% at 936.75
    • USDCOP up 0.06% at 4466.98
    • USDPEN down 0.07% at 3.912
    • USDARS up 0.5% at 130.395
    • Bloomberg Dollar Index down 0.18% at 1275.25
    • USDCNH down 0.21% at 6.7525
    • JPMorgan EM Ccy Index up 0.44% at 50.189
    • BBG Commodity Index up 1.5342 points (1.32%) at 118.0578
    • WTI Crude Oil (front-month) up $2.06 (2.18%) at $96.73
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  • BRL is rising 2.3%, even though sentiment across emerging-market currencies has been mixed this session and broad USD weakness has been limited across the currency space ahead of Wednesday’s FOMC decision. Gains in oil and metals has bolstered the supportive real price action, as have inflows to local equities. The Ibovespa is up 1.5% on Monday.
  • An additional positive factor for the Real’s rally on Monday stemmed from a headline from special secretary for the Treasury and Budget, Esteves Colnago, who said the spending cap still plays an important role fiscally.
  • Downside adjustments to 2022 inflation forecasts within the latest BCB survey may have also been welcoming news for investors, however, the increase to year-end 2023 reading, from 5.2 to 5.3% continues to indicate the deterioration of medium-term expectations.
  • Tomorrow’s key regional data release will be the mid-month IPCA inflation data from Brazil, where the annual headline rate is expected to fall to 11.41% from a prior reading of 12.04%. Data is due at 1300BST/0800ET.
  • Below gives key levels of LatAm markets in current trade:
    • USDMXN down 0.42% at 20.4422
    • USDBRL down 2.26% at 5.3734
    • USDCLP down 1.96% at 936.75
    • USDCOP up 0.06% at 4466.98
    • USDPEN down 0.07% at 3.912
    • USDARS up 0.5% at 130.395
    • Bloomberg Dollar Index down 0.18% at 1275.25
    • USDCNH down 0.21% at 6.7525
    • JPMorgan EM Ccy Index up 0.44% at 50.189
    • BBG Commodity Index up 1.5342 points (1.32%) at 118.0578
    • WTI Crude Oil (front-month) up $2.06 (2.18%) at $96.73