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BRL Firms With Risk Ahead of Inflation Data Due Wednesday

BRAZIL
  • USDBRL opens a half a percent lower in line with bolstered risk sentiment/commodities surge to start the week. A strong showing for the Brazilian Real on Friday edges us further away from highlighted USDBRL resistance just shy of 5.50. BRL 1-month implied volatility near 18% continues to be the highest in the world.
  • Political risks/concerns are likely to remain in the background - Late Friday, President Bolsonaro presented to the Senate a request for impeachment against the Supreme Court Justice Alexandre de Moraes, O Globo said on its website.
    • The Supreme Court released a statement in which it "repudiates" the President's filing of a complaint due to decisions made in an inquiry carried out by the Court.
    • Senate President Rodrigo Pacheco, who has the power to decide if impeachment will be voted or shelved, already said that he doesn't see technical, legal nor political reasons to move forward with the process.
  • The domestic data highlight this week is undoubtedly Wednesday's Aug-15 Mid-month IPCA inflation reading. The annual headline is expected to rise to 9.23% and confirmation will likely cement the likelihood of another 100 basis point Selic rate hike at the September Copom meeting.
    • Meanwhile, the economic agenda of reforms remains stuck with government failing to move forward with the changes in income taxes.
    • The so-called administrative reform, which focuses on changing rules for civil servants and was one of Bolsonaro's campaign promises, has also failed to move forward, has no date to be voted and is unlikely to advance so close to the presidential elections. (BBG)
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