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BRAZIL: Costa Says More Fiscal Measures Possible If Needed, IPCA-15 CPI Tomorrow

BRAZIL
BulletEM BulletEmerging Market News
  • The rally for the Brazilian real extended significantly yesterday, with momentum exacerbated by a clean technical break of the psychological 6.00 handle and the 50-day EMA for USDBRL. The pair closed 1.39% lower at 5.9423, narrowing the gap to 5.8675, the Dec 12 low. Further renewed optimism and BRL gains might target a deeper retracement to 5.6340, the Nov 7 low.
  • The move was supported by comments from Chief of Staff Costa who said that he will meet with other minsters to discuss ways to lower food prices. He also said that new spending cut measures will be evaluated and decided, if necessary, although he thought that the measures voted in Congress in December were enough to guarantee fiscal balance.
  • Data wise, no further macro figures are due today, after FGV IPC-S CPI data were released earlier, showing a 0.12% m/m increase in the month ending Jan 22, following a 0.18% gain previously. Looking ahead, attention turns to the IPCA-15 inflation data tomorrow, the last IPCA inflation figures ahead of next week’s BCB meeting, when the Copom has signalled it will deliver another 100bp Selic rate hike to 13.25%.
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  • The rally for the Brazilian real extended significantly yesterday, with momentum exacerbated by a clean technical break of the psychological 6.00 handle and the 50-day EMA for USDBRL. The pair closed 1.39% lower at 5.9423, narrowing the gap to 5.8675, the Dec 12 low. Further renewed optimism and BRL gains might target a deeper retracement to 5.6340, the Nov 7 low.
  • The move was supported by comments from Chief of Staff Costa who said that he will meet with other minsters to discuss ways to lower food prices. He also said that new spending cut measures will be evaluated and decided, if necessary, although he thought that the measures voted in Congress in December were enough to guarantee fiscal balance.
  • Data wise, no further macro figures are due today, after FGV IPC-S CPI data were released earlier, showing a 0.12% m/m increase in the month ending Jan 22, following a 0.18% gain previously. Looking ahead, attention turns to the IPCA-15 inflation data tomorrow, the last IPCA inflation figures ahead of next week’s BCB meeting, when the Copom has signalled it will deliver another 100bp Selic rate hike to 13.25%.