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Broad Risk Off Weighs On BRL At Open, Inflation Data Eyed

BRAZIL
  • USDBRL a touch higher to start the week around 5.4750 on pressures from geopolitical tensions affecting broader risk sentiment.
  • However, the currency pair has recently broken lower, confirming a resumption of the current bear leg and maintaining a bearish price sequence of lower lows and lower highs. The focus is on 5.3885 next (probed on Thursday), the Nov 11 low.
    • Wednesday’s mid-month IPCA headline inflation data is expected to have dipped to 10.05% from 10.42%. The next Copom meeting is on February 2nd.
  • Brazil’s official gazette showed government signed into law the 2022 budget with a deficit of 79.3 billion reais; spending cap forecast considered in the law is 1.7 trillion reais.
  • President Bolsonaro said he vetoed 2.8 billion reais ($514 million) from this year’s budget, newspaper O Estado de Sao Paulo reported, citing remarks to reporters in the town of Eldorado.
  • The vetoed amount came from expenditures earmarked for the executive branch and also congressional commission amendments.
  • Bolsonaro is working to have congress approve a constitutional amendment that would allow fuel tax reductions and if that bill should pass, the President aims to eliminate federal diesel tax. (Bloomberg)
  • Latest BCB Focus Survey Downgrades 2023 Growth Projection:
    • Brazil economists forecast 5.15% 2022 inflation; prior 5.09%
    • Brazil economists forecast 3.40% 2023 inflation; prior 3.40%
    • Brazil economists forecast 0.29% 2022 GDP; prior 0.29%
    • Brazil economists forecast 1.69% 2023 GDP; prior 1.75%
    • Brazil economists see 11.75% 2022 year-end selic; prior 11.75%
  • *Separately, the Brazilian cities of Rio de Janeiro and Sao Paulo announced on Friday they are postponing colorful Carnival parades to the end of April, due to an increase in COVID-19 cases as Omicron spreads through the country. (BBG)

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